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Decent show amid challenging environment…

About the stock: Anup Engineering is one of the leading process equipment manufacturers with special focus on heat exchangers.

* The company has a facility in Odhav, Gujarat and is currently in the process of making a greenfield expansion in Kheda

* The company aims to achieve a topline target of | 1000 crore by 2025

Q1FY22 Results: Anup reported decent Q1FY22 results.

* Revenue for the quarter was at | 52 crore, up 72% YoY, down 61% QoQ

* EBIDTA margins contracted ~355 bps YoY & ~270 bps QoQ coming in at 24%. Absolute EBIDTA came in at | 12.5 crore, up 50% YoY

* Ensuing PAT came in at | 7.9 crore. Tax rate for the quarter was at 19.6%

What should investors do?

Anup Engineering is on the cusp of entering into a new trajectory led by strong growth in topline.

* We revise our rating from HOLD to BUY on the stock.

Target Price and Valuation: We value Anup at | 1265 i.e. 18x P/E on FY23E EPS.

Key triggers for future price performance:

* Upcoming clean room facility expanding Anup’s reach into exotic metallurgy

* Timely commercialisation of Kheda capex ensuring sustained growth

* Sustained EBIDTA margins in the range of 24-26%

Alternate Stock Idea: Apart from Anup Engineering, in our capital goods coverage we also like NRB Bearings.

* It offers a play on needle roller bearings, which are largely used in auto applications

* BUY with a target price of | 175 per share.

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