Pitti Engineering zooms 7% to record high on 36% upside from Phillip Capital

In the past six months, the stock of this smallcap company has more-than-doubled as against 9 percent rise in the Sensex benchmark

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Shares of Pitti Engineering rallied 7 percent to hit all-time high of Rs 690 on the BSE on October 16 after brokerage firm Phillip Capital initiated coverage on the stock with a ‘buy’ tag, seeing an upside potential of 36 percent from current levels. The S&P BSE Sensex traded flat at 66,300 levels, as of 1pm.

In the past six months, the stock of this smallcap company has more than doubled as against a 9 percent rise in the benchmark Sensex.

So far on October 16, around 0.5 million equity shares changed hands at both the NSE and the BSE as against 0.2 million shares traded in average a  week, showed data.

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Pitti Engineering is one the leading manufacturers and exporters of electrical laminations from India. The company is also one of the leading suppliers to all motor manufacturers domestically. It specialises in manufacturing value-added motor/generator sub-assemblies and precision machine components for diverse sectors.

Analysts at Phillip Capital said that the optimistic outlook on the stock was based on strong industry tailwinds, capacity expansion, move-up in value chain that would eventually improve the company’s profitability.

“We value Pitti Engineering at 20 times (x) of FY26 earnings. The stock trades at price-to-earnings (PE) ratio of 25x/18x/14x) on FY24/25/26 earnings. The company’s valuation is likely to re-rate on higher earnings growth, strong cash-flow, and higher return ratios,” the brokerage firm said.

The company’s stepped-up focus on value-added products would aid revenue and margins over FY23-26. The merger with Pitti Casting, too, is likely to add to its margins and strengthen the component business.

In the quarter ended last June (Q1FY24), the company’s total income declined 7 percent on-year to Rs 290 crore from Rs 304 crore. Its net profit, however, surged 40 percent to Rs 14 crore.

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