Target: ₹1,501

CMP: ₹1,426.20

Pitti Engineering Ltd (PEL) reported numbers, Q1FY25 revenue stood at ₹383 crore (+32.1 per cent y-o-y/+16.7 per cent q-o-q); above our estimates of ₹371 crore. Gross Profit stood at ₹135 crore (+53.9 per cent y-o-y/18.5 per cent q-o-q); above our estimates of ₹113 crore.

Gross margins improved by 499 bps y-o-y (up by 52bps q-o-q) to 35.3 per cent vs 30.3 per cent in Q1-FY24. The raw material cost in terms of sales stood at 64.7 per cent vs 69.7 per cent in Q1-FY24. EBITDA stood at ₹56 crore (32.8 per cent y-o-y/15.9 per cent q-o-q); above our estimates of ₹47 crore.

EBITDA margin improved by 8bps y-o-y (down by 11bps q-o-q) to 14.7 per cent vs 14.6 per cent in Q1-FY24. PAT stood at ₹21 crore (+47.1 per cent y-o-y/-49.1 per cent q-o-q); above our estimates of ₹17 crore.

PEL is expected to complete the capex of 72,000 mtpa by Sep-24. The standalone volume is expected 48,000 MT and consolidated volumes are expected 63,000 MT in FY25. The company is focused on consolidation and integration of acquisition companies. The increase in assembly and value-added components would improve the margins going forward.

Post capex, incremental revenue is expected with strong execution, and strong orders are expected from top capital goods players due to the capex upcycle. We reduce rating to an Accumulate (earlier Buy).