Pennar Industries secures Rs 669 crore worth of orders bolstering growth prospects

In a monumental development, Pennar Industries, a stalwart in value-added engineering solutions, has recently notched up orders totalling a staggering Rs 669 crore, a figure nearing an impressive 50% of its current market capitalization of Rs 1500 crore.

The orders span multiple sectors, highlighting Pennar’s prowess in delivering customised engineering solutions.

These substantial orders are expected to be executed within the next two quarters, signifying a robust performance trajectory for Pennar Industries. The company’s order book stands at Rs 669 crore, contributing to its overall market strength and stability.

Financials

In Q2FY2024, Pennar Industries reported a 2% decrease in sales, amounting to Rs 814 crores compared to Rs 834 crores in September 2022. However, the company demonstrated robust financial performance with a 52% increase in EBIDT, soaring from 46.2 crores to 70.2 crores year-on-year. Net profit also exhibited a significant uptick, rising by 37% to 22.4 crores from 16.4 crores in the same period last year. Despite a slight dip in sales, the notable growth in EBIDT and net profit underscores Pennar Industries’ resilience and strategic focus on higher-margin endeavours, showcasing its ability to deliver strong financial results in Q2FY2024.

Concall Analysis

Despite flat or slightly lower revenue compared to the previous year, Management of Pennar Industries anticipates growth in the current financial year by emphasizing higher-margin revenue streams. The company has strategically focused on replacing low-margin revenue with higher-margin products and services, reflecting a shrewd business approach. The Q2FY24 PBT margin stands at 3.65%, with a cash PAT margin of 4.78%, showcasing the company’s commitment to profitability.

Pennar’s working capital days currently stand at 76 days as of September 30th, with a target of reducing it to 72 days by year-end. The company expects the working capital cycle to moderate in the next two quarters, further enhancing its financial efficiency.

Major growth drivers for Pennar Industries include pre-engineered buildings, its U.S. subsidiary PGI, hydraulics, large-diameter tubing, and engineering services. With plans to increase production capacity in the U.S., the company aims to achieve a net profit margin of 5% and an EBITDA margin of 10%, aligning with its strategic financial targets.

Pennar Industries remains optimistic about its order book, expecting growth in both the PEB business in India and the U.S. subsidiary. The company refrains from providing specific revenue guidance for the second half of the year and the next two to three years but expresses confidence in sustained revenue growth.

Stock performance

In terms of stock performance, Pennar Industries stands as a formidable player in the engineering solutions sector. The recent order influx is poised to contribute significantly to the company’s future revenue, solidifying its position as a key player in the industry. Following are the period-wise stock returns

In conclusion, Pennar Industries’ recent acquisition of Rs 669 crores in orders affirms its prowess and resilience in the competitive engineering solutions landscape. Despite a modest sales dip, the robust financial performance in Q2FY2024, marked by a 52% increase in EBIDT and a 37% rise in net profit, positions the company as a strategic player with a focus on higher-margin ventures. With a strong stock performance and a market capitalization of Rs 1500 crores, Pennar Industries is poised for sustained growth, making it a notable and promising contender in the dynamic engineering sector.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.