The Anup Engineering Ltd. - Not Out of the Woods Yet | Q1FY27 Company Update

The Anup Engineering reported a weak Q1FY27, with revenue/EBITDA/PAT missing our estimates by 35.0%/73.5%/97.7%, respectively. The ongoing war in the Middle East has led to supply-chain disruptions, slower executions, and elevated costs. The steep drop in revenue booking resulted in adverse operating leverage culminating into EBITDA margin contraction of 1,547bps YoY to 7.6%. While the company has guided FY27E revenue growth of 5-10% with ~15% EBITDA margin on the back of a book-to-bill ratio of 1.3x, we believe that would be hard to achieve considering the weak Q1FY27 performance and continuous flip flops on the USA ending war with Iran. Limited visibility on near-term earnings recovery prompts a downgrade to REDUCE (from HOLD); TP revised down to Rs 1,777 from Rs 2,040.

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Weak Q1; Adverse operating leverage:

The company reported a weak Q1FY27, with revenue declining 29% YoY to Rs 1.3bn, materially below estimates, as execution delays, supply-chain disruptions and slower project milestones weighed on performance. EBITDA fell 77% YoY to Rs 95mn, while EBITDA margin contracted 1,547bps YoY and 1,084bps QoQ to 7.6% due to adverse operating leverage and execution mix. PAT declined 98% YoY to Rs 6mn. Although the management has set a goal of 5-10% revenue growth and ~15% EBITDA margin for FY27E, delivering this now requires a sharp-execution recovery over the remaining quarters. Our sales growth estimate for FY27E aligns with the lower range of company guidance, though for FY28E we have assumed stronger growth of 15%.

Strong Backlog; Execution Key Risk:

Q1FY27 order inflow surged to a record Rs 3.2bn (book-to-bill of 1.3x), taking the order book (including LOIs) to an all-time high of Rs 9.9bn, supported by an enquiry pipeline of ~Rs 11bn. However, robust order inflows are yet to translate into execution. Export orders account for ~39% of the backlog, with meaningful exposure to the Middle East (27%).  In our view, the strong backlog provides comfort on demand; however, timely conversion into revenues is contingent on execution normalization, and geopolitical developments and supply-chain bottlenecks warrant close monitoring.

Diversification Progresses; Payoff May Take Time:

The company continues to expand into higher-value products through proprietary export orders, air-cooled heat exchangers and thermal power equipment, while strengthening its presence in nuclear, hydrogen and AI data-center cooling. The Technical Services business offers an additional long-term growth avenue with superior margins, supported by a net cash balance sheet. While these initiatives improve the long-term opportunity set, their financial contribution is likely to remain gradual, keeping core business execution the primary determinant of earnings recovery.

Valuation and view:

We have cut our earnings estimates by 26%/22% for FY27E/28E but our attributed multiples of 30.0x P/E and 21.0x EV/EBITDA remain unchanged as the company is geared to benefit significantly from the ME conflict resolution, though the timing of the same remain uncertain. Applying these multiples to our June 2028E EPS and EBITDA, we arrive at an average TP of Rs 1,777. Downgrade to REDUCE due to poor visibility on near-term earnings recovery. Key risks: Steel price inflation, weaker order inflows, and prolonged working capital stress, and further escalation in geopolitical risks.

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

*CMP is as per report published date

Click to download the full The Anup Engineering Ltd Q1FY27 Company Update

Analyst:

• Mohit Surana - Senior Research Analyst, Institutional Equities (NISM-202300189881)
• Akhil Khanvilkar - Research Associate, Institutional Equities (NISM-202500193256)

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FAQs on The Anup Engineering Ltd Q1FY27 Company Update

Below are key investor FAQs based on MNCL’s institutional equity research update on The Anup Engineering, focusing on outlook, risks and growth triggers.

How did Anup Engineering perform in Q1FY27?

Revenue declined 29% YoY to approximately ₹130 crore, while EBITDA fell 77% YoY to ₹9.5 crore. EBITDA margin contracted sharply to 7.6%, and PAT declined 98% YoY to ₹0.6 crore.

What is the target price for Anup Engineering?

The research report assigns a Reduce rating with a target price of ₹1,777 per share. This is an analyst estimate and should not be interpreted as a guaranteed future price or return.

What is the order book of Anup Engineering?

Q1FY27 order inflows reached a record ₹320 crore, taking the order book including letters of intent to approximately ₹990 crore. The company also reported an enquiry pipeline of around ₹1,100 crore.

Why did Anup Engineering margins decline?

Lower revenue booking, execution delays and an unfavorable operating-leverage impact resulted in a sharp EBITDA margin contraction. Supply-chain disruptions and elevated costs also affected profitability.

Can Anup Engineering recover in FY27?

Management has guided for 5–10% FY27 revenue growth and approximately 15% EBITDA margin. Achieving this outlook depends on a meaningful improvement in execution and normalization of supply-chain and geopolitical disruptions.

What are the key risks for Anup Engineering?

Key risks include prolonged geopolitical uncertainty, weaker order inflows, execution delays, steel-price inflation, supply-chain disruptions and potential working-capital stress.

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