This Precision Engineering Stock Plunged 30.84% Since IPO Launch, Gets A Buy

The stock price of Harsha Engineers International Limited has fallen by 30.84% from its IPO launch in September 2022. The current share price of the company is Rs 336.05. Prabhudas Lilladher, a leading brokerage sees a potential growth in the stock price and has suggested price target of Rs 439 per share.

Harsha Engineers International Limited is a TPM certified precision engineering company manufacturing bearing cages and stamped components which complies with good manufacturing practices and adheres to the standards accepted by the industry.

It was established in 1986, as the largest manufacturer of precision bearing cages in organized sector in India in terms of capacity and operations and amongst the leading manufacturers of precision bearing cages in the world with a market share of approximately 5% to 6% in the organized segment of the global brass, steel, polyamide bearing cages in terms of revenue.

It's primary business vertical is Engineering, 94% of revenue is from cages. It has developed over 7,500 types of products for its engineering business, of which more than 1,200 have been made within the last 5 years itself. Its market capitalisation is Rs 3,059.54 and has 4 strategically located manufacturing units; two in Gujarat, one in Romania and China each.

Prabhudas Lilladher's coverage
An analsyt of Prabhudas Lilladher did a coverage report on Harsha Engineers International Limited. The report stated that Harsha Engineers International Limited raised Rs. 4,274 million of primary proceeds in its IPO in September 2022, of which Rs 2,700 million was earmarked for debt repayment. The company has utilized the full amount, sharply bringing down the net debt/EBITDA ratio from 1.0x as of FY22 to -0.8x as of H1FY23. Its profit after tax rose at a 12.9% CAGR over FY19-22 along with an improvement in margins from 6.2% to 7.0%, driven by operational cost efficiencies and lower interest expenses.

Based on the analsyis of the company, the analyst asked investors to buy shares of Harsha Engineers International, as there is a potential upside of upto 35.08% indicated. "We initiate coverage on Harsha Engineers International with a 'BUY' rating at a target price of Rs439, valuing it at a PE of 22.0x FY25E. The company is well placed for long-term growth given its leadership position in the domestic and global organized bearing cages market (~50-60% share and ~6.5% share respectively), long standing relationships with top bearing players, excellence in tooling & customized precision engineering and increasing share of higher value products in the mix. We estimate revenue/PAT CAGR of 8.6%/25.5% over FY22-25E driven by outsourcing of cage production and localization of manufacturing in India, scale up in bronze bushings, precision stamped components and large-size cages, interest and power cost savings, and turnaround in Romania operations.

Disclaimer:
The stock has been picked from the brokerage report of Prabhudhas Lilladher, Greynium Information Technologies and the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.