Any current/future new fundraising through debt or equity?

As of August 19, 2024, Pitti Engineering Limited has completed a fundraise of up to INR 360 crores via Qualified Institutional Placement (QIP). There are no plans for additional inorganic acquisitions or fundraises within the current financial year. The company intends to focus on consolidation and integration of recent acquisitions. Free cash flow generated will be primarily used to reduce existing debt. Debt level was reduced from INR 525 crores (June 30, 2024) to about INR 300 crores as of August 1, 2024. Future fundraising decisions will be evaluated closer to the next financial year based

Any current/future capex/capital investment/strategic investment?

Pitti Engineering is currently undertaking a capex of INR198 crores focused on machining capacity expansion at the Aurangabad facility. The Aurangabad plant has added 2.5 lakh sq. ft., with capacity expandable up to 100,000 tons per annum (an increase of 28,000 tons). The machining capex is planned to be completed flexibly within 12 to 18 months, aligned with demand to avoid overhead costs without revenue. The company completed acquisitions (Bagadia Chaitra and Dakshin Foundry) in the current financial year with no immediate additional inorganic acquisition plans. Funds raised via QIP (up to I

Future growth expectations in sales/revenue/volumes?

Q1 FY '25 saw the highest ever volumes, revenue, and EBITDA for the quarter, indicating strong growth momentum. Stand-alone revenue grew by 21.92% to INR 354.45 crores; sales volume increased 24.63% to 12,411 tons. Consolidated capacity is set to increase to 90,000 MT per annum with new commissioning in Aurangabad by September, enabling higher production. The company has an optimistic outlook for the rest of the year aiming to surpass annual targets of 48,000 MT (stand-alone) and 63,000 MT (consolidated). Growth driven by continued demand across almost all customers and new acquisition

Future growth expectations in earnings/operating earnings/profits/EPS?

Pitti Engineering expects sales volumes and revenues to grow in upcoming quarters due to increment cycles and increased demand. EBITDA per ton is anticipated to increase from INR43,785 to about INR48,000 on a standalone basis after merger with Pitti Castings. Consolidation benefits from recent acquisitions (Bagadia Chaitra and Dakshin Foundry) are expected to improve margins and EBITDA per ton significantly over the next 2-3 quarters. New capacity commissioning at Aurangabad by September will increase consolidated capacity to 90,000 MT, supporting volume growth. The company aims to surpass ann

Current/ Expected Orderbook/ Pending Orders?

Total order book as of August 2024 is around INR 1,000 crores. Short-term and long-term order mix: - Long-term orders: Approximately INR 200 crores (depleting and one-time in nature). - Remaining are short-term orders, replenished regularly. The company follows a build-to-ship model; hence, the order book may not fully indicate current business strength. Railway business exposure (30%-35%) is stable with no expected degrowth; more railway orders are anticipated going forward. Incremental order inflows are expected, supporting optimistic outlook for the year.

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Pitti Engineering LtdQ2 FY24Industrial Manufacturing

Pitti Engineering Ltd Q2 FY24 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹995P/E: 28.9Market Cap: ₹3.7K CrSector: Industrial Manufacturing

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 2

→Q1 FY '25 saw the highest ever volumes, revenue, and EBITDA for the quarter, indicating strong growth momentum.
→Stand-alone revenue grew by 21.92% to INR 354.45 crores; sales volume increased 24.63% to 12,411 tons.
→Consolidated capacity is set to increase to 90,000 MT per annum with new commissioning in Aurangabad by September, enabling higher production.
→The company has an optimistic outlook for the rest of the year aiming to surpass annual targets of 48,000 MT (stand-alone) and 63,000 MT (consolidated).
→Growth driven by continued demand across almost all customers and new acquisitions (Bagadia Chaitra Industries and Dakshin Foundry) expected to consolidate and improve performance.
→Increment cycles completed in Q1, with expected sales growth impacting revenue positively in coming quarters.
→No immediate further inorganic growth planned in FY 2025; focus is on integration and consolidation of recent acquisitions.

Margin guidance

Category 3

→Pitti Engineering expects sales volumes and revenues to grow in upcoming quarters due to increment cycles and increased demand.
→EBITDA per ton is anticipated to increase from INR43,785 to about INR48,000 on a standalone basis after merger with Pitti Castings.
→Consolidation benefits from recent acquisitions (Bagadia Chaitra and Dakshin Foundry) are expected to improve margins and EBITDA per ton significantly over the next 2-3 quarters.
→New capacity commissioning at Aurangabad by September will increase consolidated capacity to 90,000 MT, supporting volume growth.
→The company aims to surpass annual targets of 48,000 MT (standalone) and 63,000 MT (consolidated).
→Debt reduction focus with free cash flow expected to reduce net debt from INR300 crores post-fundraise.
→Overall outlook is optimistic for continuing growth in earnings, driven by volume expansion, improved operating leverage, and integration of recent acquisitions.

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Fundraise plans

Yes

→As of August 19, 2024, Pitti Engineering Limited has completed a fundraise of up to INR 360 crores via Qualified Institutional Placement (QIP).
→There are no plans for additional inorganic acquisitions or fundraises within the current financial year.
→The company intends to focus on consolidation and integration of recent acquisitions.
→Free cash flow generated will be primarily used to reduce existing debt.
→Debt level was reduced from INR 525 crores (June 30, 2024) to about INR 300 crores as of August 1, 2024.
→Future fundraising decisions will be evaluated closer to the next financial year based on integration progress and strategic requirements.

Order book

→Total order book as of August 2024 is around INR 1,000 crores.
→Short-term and long-term order mix:
→ - Long-term orders: Approximately INR 200 crores (depleting and one-time in nature).
→ - Remaining are short-term orders, replenished regularly.
→The company follows a build-to-ship model; hence, the order book may not fully indicate current business strength.
→Railway business exposure (30%-35%) is stable with no expected degrowth; more railway orders are anticipated going forward.
→Incremental order inflows are expected, supporting optimistic outlook for the year.

Capex plans

Yes

→Pitti Engineering is currently undertaking a capex of INR198 crores focused on machining capacity expansion at the Aurangabad facility.
→The Aurangabad plant has added 2.5 lakh sq. ft., with capacity expandable up to 100,000 tons per annum (an increase of 28,000 tons).
→The machining capex is planned to be completed flexibly within 12 to 18 months, aligned with demand to avoid overhead costs without revenue.
→The company completed acquisitions (Bagadia Chaitra and Dakshin Foundry) in the current financial year with no immediate additional inorganic acquisition plans.
→Funds raised via QIP (up to INR360 crores) aim to strengthen the balance sheet and support future growth; free cash flow will focus on debt reduction before considering new acquisitions.
→The merger approval with Pitti Castings is expected soon, which will further consolidate and grow the business.

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