Target: ₹3,800
CMP: ₹2,740.60
We initiate coverage on The Anup Engineering Ltd (Anup) with a Buy rating and a TP of ₹3,800. We believe Anup will enjoy a strong runway of growth considering a global focus on energy transition and energy security for which Anup’s products are indispensable.
The company’s expansion plan has been done strategically to facilitate the manufacturing and delivery of larger-diameter products and cater to a larger pool of clients. Additionally, the company has a huge scope for further improving its TAM as and when it gets into new technological tie-ups, like its existing tech tie-up with Lummus Technology for Helical Heat Exchanger.
Growing focus on hydrogen production globally and accelerating end-user capex in the Oil & Gas sector bodes well for Anup’s secular growth reducing risks of cyclicality and improving demand prospects.
The company’s capacity expansion plans, tech tie-ups, good order backlog, timely execution capabilities, and long-standing customer base are strong pillars for consistent high growth going forward. Our Buy rating reflects Anup’s superior profitability, sensible capital allocation, strong sector tailwinds, and potential for strong sales growth over the next few years. Positive sector tailwinds also justify its premium valuation versus other peers.
Key downside risks: global economic slowdown, new O&G capex delays, capacity expansion delays, and higher competition.