Strong operating performance; revenue growth modest
• The ANUP Engineering (ANUP) delivered a strong operating performance in Q3FY24 that cushioned the softer than expected revenue growth. Revenue, at INR128cr (est. INR134cr), was impacted by a free issue material order for a client to the tune of INR12cr. Adjusting for the same, revenue would have come in ~INR140cr. EBITDA margin, at 23.4%, was better than our estimate of 21.6%, leading to an inline PAT at INR20cr.
• Order book at the end of Q3FY24 stood at INR813.5cr as against INR629.5cr at the end of Q2FY24. Orders worth INR150cr have been booked for the new Kheda facility. Extension of the second manufacturing bay is expected to turn operational in Q1FY25.
• We introduce our FY26 estimates, reaffirm ‘Tactical BUY’, but raise the TP to INR3,240 (from INR3,192), valuing the stock at 24x FY26E P/E (0.9x PEG using FY24–26 EPS CAGR of 27%). We have tweaked our FY24 and FY25 estimates to account for a better margin performance. The stock is trading at 32x/25x FY24E/FY25E P/E ratio.
Muted revenue growth due to one-off
Revenue, at INR128cr (est. INR134cr), was impacted by a free issue material order for a client to the tune of INR12cr. Adjusting for the same, revenue would come in ~INR140cr. Revenue from heat exchangers fell 51% QoQ to INR65cr. This was on expected lines given the management’s long-term target to diversify revenue and reduce the contribution of heat exchanger revenue to ~60%. The diversification will be aided by increased contribution of vessels, reactors, and towers and others, which will be supplied from the new Kheda plant.
Strong operating performance
EBITDA margin, at 23.4%, was better than our estimate of 21.6%. It cushioned the softer than expected revenue growth, leading to an inline PAT of INR20cr. Exports contributed 33% to revenue (versus FY24 guidance of 30%) and is pegged at over 40% in FY25. Export orders yield 1–2% higher margin and higher advances. ANUP has repaid debts worth INR20cr out of gross debt of ~INR41cr in January which will result in lower interest cost going ahead. Better collections and higher advances (due to export orders) in Q3FY24 led to better working capital cycle turns of 4.3x. The management expects working capital cycle turns to moderate to 3–3.5x in the long run.
Order book and guidance
Order book at the end of Q3FY24 stood at INR813.5cr as against INR629.5cr at the end of Q2. It expects to book orders worth INR100–150cr in Q4FY24. Orders worth INR150cr have been booked for the new Kheda facility. Extension of the second manufacturing bay is expected to turn operational in Q1FY25. Order inflows in Q3/9MFY24 stood at INR307cr/INR662cr, with an export contribution of 57%. The management maintained its FY25 revenue growth guidance of 25–30%. It has begun calibrating its order book for FY26 as it expects to execute order of ~INR675cr over the next 10–12 months.
Reaffirm ‘Tactical BUY’
ANUP is a derivative play on the robust capex upcycle in refining and petrochemicals, renewables, and hydrogen initiatives. It has ample headroom to sustain growth ahead, with the addition of new capacity at the Kheda plant, gradual shift towards complex metallurgy products, and a robust export market, backed by strong execution (with an impeccable record of on-time delivery). We introduce our FY26 estimates, reaffirm ‘Tactical BUY’, but raise the TP to INR3,240 (from INR3,192), valuing the stock at 24x FY26E P/E (0.9x PEG using FY24–26 EPS CAGR of 27%).
Click here to download The Anup Engineering Q3fy24 result update by Nuvama
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