Pitti Engineering Share Price could be in focus on Monday as Axis Securities has suggested BUY Call for the stock with target price of Rs 1572. Pitti Engineering stock opened at Rs 1296 on Friday and closed flat after touching intraday high of Rs 1309. The stock has touched 52-week high and low of Rs 1447 and 580 respectively.

Axis Securities has issued a BUY recommendation for Pitti Engineering Limited (PEL) with a target price of INR 1,572, citing the company's strategic capacity expansion and robust market positioning. PEL is scaling up its production capabilities at the Aurangabad facility to meet rising demand, which will significantly boost its total production capacity. The company’s recent acquisitions, including Dakshin Foundry and Bagadia Chaitra Industries, will further enhance its operational scale, diversify its product offerings, and improve its geographic footprint. Despite lower margins in new business segments, these expansions are projected to be accretive from FY25 onwards, justifying a positive outlook.

Strategic Capacity Expansion to Drive Growth

PEL is in the process of expanding its production capacity at the Aurangabad facility, a move that aims to meet growing demand while fortifying its market position. The ongoing efforts will enhance the company’s consolidated capacity from 56,000 TPA to 90,000 TPA, with expectations to reach 100,000 TPA by January 2025. This expansion is not just about scale but also aligns with the company’s commitment to environmental sustainability, setting the stage for PEL to cement its status as India’s largest manufacturer of laminations.

Increased Focus on Value Chain Integration

PEL is strategically expanding its control over the value chain in motor manufacturing, where lamination comprises 25%, copper winding 25%, casting 15-17%, shafting 4-5%, and other components 30% of the total value chain. Currently, PEL covers approximately 40% of this value chain and is actively working to increase this share. By integrating in-house copper winding, the company aims to improve margins and create a more resilient and comprehensive production process.

Valuation and Investment Recommendation

Axis Securities maintains a BUY rating for PEL, with an unchanged target price of INR 1,572 per share, suggesting a potential upside of 21% from the current market price. The stock is valued at 28x its projected FY26 earnings per share (EPS). Key drivers include robust capital expenditure, significant capacity additions, and an improved order book. The increased revenue from value-added products and the integration of newly acquired businesses are expected to drive revenue growth and profitability, reinforcing the positive investment case.

Strong Financial Performance and Acquisitions

PEL reported strong financial performance with a 32.1% year-on-year revenue increase, driven by robust volume growth. Key acquisitions, including Dakshin Foundry Private Limited (DFPL) and Bagadia Chaitra Industries Private Limited (BCIPL), are strategically enhancing PEL’s market position. DFPL’s expertise in high-quality iron castings and BCIPL’s addition of a pump segment with Texmo as a key client are poised to diversify PEL’s product portfolio and expand its market reach.

Anticipated Synergies from Mergers and Acquisitions

The acquisitions of DFPL and BCIPL not only boost PEL’s capacity but also open avenues for entering new sectors and geographical markets. The pending merger with Pitti Castings, currently awaiting NCLT approval, is expected to further streamline operations and enhance overall capacity utilization. These strategic moves position PEL for stronger growth, increased market presence, and enhanced client servicing capabilities.

Revised Valuation Metrics and Target Price

Brokerage house KRChoksey has also reiterated a BUY call, raising its target price to INR 1,552 from INR 1,379, based on an increased FY26 earnings multiple of 25x. This revision reflects higher anticipated capacity from acquisitions, improved utilization rates, and robust market demand. The expected EPS for FY26 has been revised upward to INR 62.1, underscoring the company’s potential for continued top-line and bottom-line growth. Consequently, the revised valuations reflect confidence in PEL’s strategy and its ability to leverage ongoing expansions for long-term value creation.