The Anup Engineering - All eyes on cash conversion | Company Update

We maintain our HOLD rating on Anup Engineering but increase TP to Rs 2,475 (vs Rs 2,375 earlier) considering steady operational performance and an unchanged growth outlook coupled with valuation rollover. The impact from higher taxes was anticipated but we expect better bottom line growth from Q4 onwards. Initiatives to strengthen its global footprint and drive services business should aid growth and margin stability but order backlog and cash conversion remains key monitorable for more confidence in the growth trajectory . The stock is trading at a 2-year forward P/E of 31.0x and EV/EBITDA of 21.0x leaving limited upside from current levels.

Topline growth in line with our estimates:

Anup reported healthy Q2FY26 performance with revenue of Rs2.3 bn, up 20% YoY and 33% QoQ, driven by broad-based execution across key sectors. EBITDA rose 19% YoY and 28% QoQ to Rs515 mn, with margins stable at 22.2%, reflecting sustained operating efficiency. PAT stood at Rs321 mn, down 2% YoY due to a higher effective tax rate but up 22% QoQ, with margins at 13.8%. Overall performance was in line with guidance, supported by stable margins, though profitability was moderated by higher interest costs and normalization of earlier ESOP-related tax benefits.  Notably, cash conversion remains a key monitorable going forward ─ H1FY26 EBITDA stood at Rs918 mn, while operating cash flow was negative at Rs622 mn during the same period.

Broader market reach may aid growth:

Order inflows for the quarter was down 26% YoY but the management expects a recovery in 2H-FY26. The company is deepening its global presence with a new office in Dubai and plans for a Houston base to engage directly with the USA customers, moving beyond its traditional focus on large OEMs. With opportunities unfolding across O&G, thermal power, specialty chemicals, and the services segment, the management remains optimistic of recovery in order intakes.

Guidance optimistic but order book growth is monitorable:

The Company’s entry into newer sectors and markets, along with a growing services business, is expected to aid diversification and support long-term growth. Management remains positive on this front anticipating some key orders to materialize in 2H-FY26 .  We believe, while prospective opportunities exist, the same is not reflected in its order book ─ Order book fell 5% QoQ to Rs6.03 billion (no USA exposure) in Q2FY26, and the book-to-bill ratio has moderated from 1.0x in FY25 to 0.7x in Q2FY26. That said, the enquiry pipeline remains strong as per the management.

Valuation and view:

We continue to maintain our hold rating on the stock taking cognizance of the declining order backlog and overhang in key markets. We have assigned an unchanged 30.0x P/E and 22.0x EV/EBITDA to September 2027E EPS and EBITDA, with no change to our estimates. Key downside risks: Global economic slowdown, new O&G capex delays, capacity expansion delays, and higher competition.

Company website: https://www.anupengg.com/

Click to download the full Anup Engineering Ltd Company Update

Analyst:

• Mohit Surana - Senior Research Analyst, Institutional Equities (NISM-202300189881)
• Mohd Haris - Research Associate, Institutional Equities (NISM-202400161268)

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