AUM Capital

Target: ₹312

CMP: ₹241

Headquartered in Hyderabad, it is engaged in the manufacturing of electrical steel laminations, motor cores, sub-assemblies, die cast rotors and press tools with an installed capacity of 41,000 tpa as of December 2021.

PEL is currently undergoing capacity expansion from 41,000 tpa to 72,000 tpa by FY24 at a cost of ₹270 cr. The increased capacity would help the company to serve the incremental demand which would drive the business growth.

The company enjoys a competitive advantage by developing more than 5,000 different varieties of products for its clients. Any new entrant would take considerable time to match the quality of PEL and hence, PEL enjoys the advantage of ‘Barriers to Entry’.

Over a period of time, PEL has established a very solid client base through its diversified product offerings, which include renowned names as BHEL, Cummins, Toshiba, ABB, Wabtech, L&T, etc.

With the Government of India laying stress on the infrastructure development of the country by allocating about ₹7.50 Lakh crore for development projects, growth for industries such as cement, steel and power is expected to be strong, going forward. This, in turn, creates demand for PEL, which supplies critical components to these industries.

We recommend a ‘Buy’ on the stock with a target price of ₹312, in the next 9-12 months.

Published on May 12, 2022