THE RESEARCH HOUSE
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Shriram Pistons & Rings Ltd

Acutaas Chemicals Ltd

Pearl Global Industries Ltd

Sudarshan Chemical Industries Ltd

Technocraft India Industries Limited

We have recommended Sansera Engineering with a view of it being an engineering-led manufacturer of complex and critical precision engineered components across automotive and non-automotive sectors like Aerospace & Defense. Co has a track record of outperforming Auto Industry growth by +10% historically. It is having healthy order book of Rs. 1,700 cr (53% of order book is Tech Agnostic, EV + Non-Auto segment vs 22% of Revenue share currently from these segments). It expects 50% CAGR in Aerospace Segment, 40% growth in Exports and overall more than 20% CAGR with 20% RoCE going forward. Co is expected to deliver Revenue / PAT CAGR of 20% / 39% over FY23-25e.  Structurally, with ongoing diversification (towards Aerospace, Defense, EV Components), Sansera is set to get re-rated (currently at 17x on FY25e) in line with other auto ancillary majors and become a top quality market cap compounding company

Gokaldas Exports, is a hold recommendation based on the view that it is a leading apparel manufacturer with a 36 million annual capacity and has seen a 17% revenue CAGR in FY18-23 and a 68% PAT CAGR in FY19-23. India currently exports approximately $4bn worth of apparel to the US market which expected to expand rapidly in the future, and the company's financials have seen a 24% YoY growth in revenue since initiation (FYE22), 32% YoY growth in EBITDA, and 37% YoY growth in PAT, outperforming expectations.The company is incurring a capex and has recently acquired Atraco, allowing it to access duty-free export destinations. The stock is trading at a PE of 23x/18x on FY24e/25e earnings, with proceeds from the capex expected to kick in from FY26. 

We expect the company to do Rs.4000 cr. EBITDA in FY26 (hence 3x EV/EBITDA) and almost debt free. Rs 3200 cr. capex done and more Rs.3900 cr. capex planned (to be completed by FY26E). Co is not only into steel but has added aluminium foil, stainless steel, and others to its portfolio. The game changer for Shyam can be the new stainless-steel business and its shift in focus towards the B2C channel. We believe that the company's fresh capital expenditure will increase its backward integration and new product segment additions such as ductile iron pipe, hot flat products, and parallel flange beams will provide the company with a fresh source of income in the coming year.

Recommendation of Craftsman was done with a view of it being a diversified engineering company with vertically integrated manufacturing capabilities. It operates in three business segments: Automotive Powertrain (52% of revenues), Aluminium Die Casting (25%), and Industrial and Engineering (23%). The company is expected to register a PAT CAGR of 41% over FY23-25e, driven by continued strength in the MHCV Segment, ramp-up operations in the aluminium castings segment, and manufacturing wave in India. The company's financials show a 43% increase in sales, 25% and 61% increase in EBITDA and PAT respectively over FY21-23.

Lupin Ltd

ZFCV was recommended with a view of being the market leader in the domestic CV braking segment, with diversified exposure across OEMs, aftermarket, and exports. The company's content per vehicle is set to rise by 3x, and the parent company is focusing on ZF CV India as a key sourcing hub. The market size is expected to grow by 4x from current levels, with a value addition of around Euro 600/CV in India compared to 1600/unit in Europe. Margin growth was seen in EBITDA from 10% to 14% and rise in revenues and PAT by 35% and 85% respectively. 

We had recommended KPIT with a view that increasing electric vehicle investment by global auto companies (Top 15) would lead to increasing requirement of services of Auto ER&D players like KPIT who provide whole gambit of solutions such as ADAS, Connected device, EV Powertrains etc. Also, KPIT margins were at the lower range of 12%, which we expected to improve going ahead due to better utilization of resources & pick up in the orders inflows. We anticipated that margins would improve to near 20% which would lead to rerating of earnings multiple as it was trading at just 18x on FY23e basis which was significantly discount compared to peers such as Tata Elxsi and LTTS.

We recommended HAL with a view that increased GOI action towards indigenization and manufacturing in India presents HAL with a significant decadal growth runway, with deal pipelines (Helicopters, Aircraft, Engines) worth between $35-40 billion. With a leading ROE and net cash position, HAL's financials exceeded expectations, with revenue and PAT growing by 8% and 28% CAGR respectively.

KSB Ltd, a German multinational firm, manufactures Pumps & Vales for various industries we recommended as the company is a proxy play for water/energy/industrial capex recovery. New product introduction and focus on export and service business should boost earnings in the medium term. KSB is looking at an opportunity of Rs. 3,000 cr in coolant pump, secured by Rs 10 billion (2 orders). The company has registered revenue, EBITDA, and PAT growth of 23%/21%/25% over CY20-22.

Recommendation of Titagarh was based upon the fact that it is a leading freight wagon manufacturing company and the only company in India to be able to manufacture Stainless steel and Aluminium coaches for Metro, it had won the largest order for 24,177 freight wagons from the Indian railway in 2022, worth Rs 7,838cr. With a market size of 30,000cr, the company's financials have seen a 16% CAGR in revenue and a 78% growth in profitability over the same period.