Target: ₹415
CMP: ₹388.40
We revise our FY24E/FY25E EPS estimateby –38.5 per cent/-20 per cent to factor in continued demand softness in Europe & China and delays in the expected turnaround in Romania & China subsidiaries.
Harsha Engineers International (Harsha) reported a 5.4 per cent YoY rise in revenue as robust growth in Solar EPC cushioned the fall in Engineering. EBITDA margin contracted by 451 bps y-o-y, led by a sharp decline in gross margin due to higher share of Solar EPC in the mix. Despite a minor slowdown in India Engineering business, visibility is healthy for the medium to long-term. Although a revival is expected by Q4, Romania & China businesses are expected to report losses for the full year.
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Harsha’s long-term outlook remains positive given its market leadership in bearing cages, turnaround in Romania & China, greenfield capacity expansion plans and multiple levers for long-term growth viz (bearing cage outsourcing, significant capex by global bearing customers in India, growing opportunity in large-size cages, Japan wallet share gains, and demand for bronze bushes).
We roll forward to Sept-25 and maintain ‘Accumulate’ rating with a revised TP of ₹415 (₹474 earlier), valuing it at 21x on Sep-25 expected EPS.