ICICIdirect has selected Pitti Laminations as techno-funda pick. It has recommended 'Buy' in the range of Rs114-109 for target of Rs 158 with stop loss of Rs 98, for duration of 6 months. The broking house gave the following technical and fundamental outlook:
On technical front, 'The share price of Pitti Laminations registered a multi-year breakout in January 2015 as it surged past its historical peaks of 2007 (Rs 86) and 2012 (Rs 84) signalling a major turnaround on larger degree price charts. The price conquering its multi-year supply barrier above Rs 86 indicates a major structural shift in favour of bulls and has larger positive implications for the stock, going forward.
The positive price breakout past multi-year highs and the implying structural turnaround is further augmented by the behaviour of volumes. The monthly volumes during the January 2015 breakout (14.83 lakh shares) were more than 4 times the 12 month average volume of 3.5 lakh shares. Further the follow-up volumes in February 2015 were also significantly higher at 13.30 lakh shares which suggests the increased investor appetite to own the stock and points towards a major shift of sentiment which augurs well for the longevity of the current bull trend.
We expect the stock to ride the new found momentum and remain on course towards target of Rs 158. The measured price objective of the multi-year range breakout, i.e. the distance between the 2007 high of Rs 86 and 2009 low of Rs 14 (Rs 72 points) projected from the breakout point of Rs 86 opens upsides towards Rs 158 on a larger time frame.'
While commenting on fundamental outlook, the broking firm opined, 'Pitti’s topline has grown at a CAGR of 14.4% in FY10-14 while its PAT has grown at a CAGR of 93.4% in FY10-14 largely due to forex fluctuations. Pitti clocked a topline of Rs 2.47.8 billion in FY14 with corresponding EBITDA at Rs 327 million and PAT at Rs 42 million. Post a subdued FY14, the performance has improved in FY15 and is gaining traction with 9MFY15 sales at Rs 2.37 billion, up 31% YoY (Rs 1.81 billion in 9MFY14) and 9MFY15 profit at Rs 50 million (Rs 20 million in 9MFY14).
Going forward, on the back of the domestic capex cycle being on the cusp of a cyclical recovery and good export orders visibility (GE group companies awarding Pitti a three year contract (CY15-17) worth Rs 6 billion), Pitti is on a strong footing of recovery and is a poised for a robust growth ahead. Central Government initiatives like coal blocks auctioning, launch of e-biz portal, correcting the inverted duty structure for the domestic electronics industry (Union Budget 2015-16) and emphasis on making India a manufacturing hub through “Make In India” campaign bode well for the domestic capital goods industry in general and Pitti Laminations in particular.'
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