The Anup Engineering is a small-cap with a market capitalisation of Rs 2100 crore. It is engaged in the manufacture of process equipments like heat exchangers, vessels, reactors, columns etc.
The promoters hold 42.9% of the equity capital. The public holds 43.2%. Abakkus Emerging Opportunities Fund-1, the PMS Fund of Sunil Singhnia, holds 3,79,012 shares comprising 3.83% of the equity capital.
ICICI-DIrect has examined the fundamentals of the Company in detail and recommended a buy for the target price of Rs 2590 which is an upside of about 23%.
The text of the research report is as follows:
About the stock: The Anup Engineering (TAEL) is one of the leading manufacturers of process equipments like heat exchangers, vessels, reactors, columns etc
• The company has a facility in Odhav, Gujarat and is currently in the process of undertaking a greenfield expansion in Kheda
• Consolidated revenue grew 18.8% CAGR during FY20-23 while EBITDA and PAT have grown by 6.4% and 6.2% CAGR respectively over the same period. In FY23, revenue and PAT stood at Rs 411.3 crore and Rs 51.4 crore respectively. The company aims to achieve a topline of ~Rs 1000 crore by FY27, implies CAGR of ~25%
Key Investment Thesis:
• Well positioned with strong capabilities; focus on expanding capacity, growing product range & increasing exports share: The company caters to wide range of process industries with its extensive product range of Heat Exchangers, Reactors, Pressure Vessels, Columns & Towers etc. With its manufacturing facility at Odhav, the company has been able to maintain its dominant position in heat exchangers (74% of FY23 revenues). Moreover, the new facility at Kheda (to be fully commissioned in Q2FY24) provides an opportunity to enhance its core product portfolio. Also, company is focused on increasing its exports share from ~19% in FY23 to 30% by FY24 end
• Strong order pipeline led by buoyant capex cycle: Company’s order backlog stood at | 651 crore as of June 2023 end (67% from heat exchangers, 17% from tower & reactors, 12% from vessels). Domestic and exports orders contribute ~51% and ~49% of the total respectively. We believe that strong capex cycle across the capital goods segments presents substantial opportunities for the company’s products. Moreover, India’s emergence as one of the best choices in manufacturing capital goods equipments provides a sizable opportunity to company to increase its exports orderbook. Company expects total orders inflows worth | 600-650 crore in FY24E, provides healthy revenue growth visibility
Rating and Target Price
• Anup Engineering is strongly positioned to benefit substantially from buoyant industrials capex scenario. With focus on expanding product portfolio and exports, we believe company’s operational and financial performance would improve considerably in the coming period. We estimate revenue and PAT to grow at ~26% and ~41% CAGR over FY23-25E. Balance sheet remains strong with healthy return ratios
• We maintain our BUY rating on The Anup Engineering. We value the stock at Rs 2590 per share (based on 25x FY25 EPS)
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