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Nano Nivesh - The Anup Engineering - ICICI Securities

Posted On: 2020-09-24 08:30:35

The Anup Engineering, one of the leading process equipment manufacturers in India, is on the brink of setting foot into a higher trajectory by way of debottlenecking its existing capacity and a new greenfield expansion. Anup has commissioned a new heavy bay in the Odhav facility whereas the first bay of grass root facility in Kheda is expected to get commissioned by September 2021. The new heavy bay at the Odhav facility will enable Anup to execute larger and more complex equipment orders at the said facility. This shows that the management's target of making Anup a Rs. 1000 crore company in the next five years looks within the realms of possibility.

Robust order inflows in Q1 exhibit underlying demand

Anup's orderbook at the end of Q1FY21 was at Rs. 377 crore. As per our back of the envelop calculation, we estimate an order inflow of ~Rs. 140-150 crore in Q1FY21. The current orderbook provides visibility for more than a year. Furthermore, the recent commissioning of heavy bay at the Odhav facility would help leverage incoming opportunities in more complex and high value orders. We expect revenues to exhibit a CAGR of 16.3% over FY20-22E.

Capex in oil & gas, petrochemicals, LNG & specialty chemicals to usher in growth

Traditionally, hydrocarbon has been a dominating segment for Anup. However, going ahead, the management sees opportunity in petrochemicals, specialty chemicals, LNG plants. A major part of order inflow would still be from the oil & gas sector given capex from new refineries like Numaligarh (project size ~₹ 22000 crore), HPCL Rajasthan together would be ~₹ 65000 crore in the next five to seven years. Further, ongoing construction of four LNG terminals with a capacity of 19 MMTPA and proposed three LNG terminals of 10 MMTPA capacity would also provide additional opportunity. Significant envisaged capex in the chemical and food processing industries would provide new segmental opportunities for ANUP in the medium to long term.

Strong visibility to drive rerating

Historically, Anup has delivered a strong performance, albeit on a low base wherein sales and PAT CAGR were at 16% and 24%, respectively, over FY15-20. Going ahead, we believe this performance momentum will give decent order wins in FY20-Q1FY21 while commissioning of capacity at the existing facility and upcoming capex at Kheda, entry into newer geographies will drive PAT CAGR at 20.5% in FY20-FY22E. Earnings momentum and strong debt free balance sheet generating consistent RoICs in excess of 20% are expected to trigger a rerating for Anup. Hence, we assign a BUY rating to the stock at 12x FY22E EPS with a target price of Rs. 735/share

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Source: Equity Bulls

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