The Anup Engineering: Through the Trough, Recovery in the offing - Company Update

We upgrade our rating on The Anup Engineering to BUY (previously HOLD) and revise our target price to Rs 2,515. The company is not yet out of the woods, with the market awaiting clear signs of a recovery in order inflows. That said, we believe the worst is likely behind, supported by improving execution, a resilient balance sheet, and early policy tailwinds. The recent India–EU FTA and India–US trade deal enhances the competitiveness of Indian process equipment exporters and improve medium-term demand visibility. While near-term order booking remains the key monitorable, we see recovery in the offing, with growth and margins expected to improve gradually as capex activity picks up across core end-user industries. We estimate a revenue/EBITDA/PAT CAGR of ~18%/15%/11% over FY25-28E.

Topline growth in line with our estimates:

Anup posted Q3FY26 revenue of Rs 2.07 bn (+21% YoY, −11% QoQ; 9MFY26: +20% YoY), marginally ahead of estimates, led by steady execution across segments, though profitability trailed expectations. EBITDA increased 13% YoY but declined 14% QoQ to Rs 441 mn, with margins compressing to 21.3% (−140 bps YoY, −90 bps QoQ) amid global headwinds. PAT declined 16% YoY and 20% QoQ to Rs 255 mn (12.3% margin), impacted by a higher effective tax rate (21% vs 8% in Q3FY25) and a one-off labour code charge. Overall, while topline delivery remained resilient, margin pressure and sequential weakness weighed on earnings.

Capex cycle completed; new customer additions:

Anup’s enquiry pipeline stands at Rs 11 bn, with management targeting a 20–25% conversion. During the quarter, the company secured small but strategic orders from NPCIL (Kaiga Nuclear Project), NTPC (feedwater pumps) and GE (plug machine), which enhance optionality for follow-on and ancillary wins. Phase-2 commissioning at the Kheda facility—focused on high-volume products, which lifts annual revenue potential of the Kheda facility to ~Rs 4.5 bn versus Rs 1.86 bn achieved in 9MFY26 (~55% utilization implied). No further capex planned until FY27. Against improving sentiment post US–India tariff clarity, management reiterated FY26 guidance of 15–20% revenue growth with ~22% EBITDA margins.

Order Book Soft; outlook Improving:

Anup’s Q3FY26 order book declined to Rs 5.5 bn (–29% YoY; flat QoQ), reflecting a pronounced domestic tilt as export share nearly halved amid tariff pressures and a tapering US exposure. Despite a robust enquiry pipeline, sluggish conversion persisted, with book-to-bill at ~0.7x, in line with Q2. With near-term capex behind, diversification into services and adjacencies gaining traction, and a stabilizing trade backdrop, we remain constructive on a recovery in order inflows and operating performance.

Valuation and view:

We upgrade our rating on the stock to BUY from HOLD, rolling forward our valuation to Dec’27E. We continue to value the company at 30.0x P/E and 22.0x EV/EBITDA on Dec’27E EPS and EBITDA, respectively, with no material changes to our underlying estimates. Key downside risks: Global economic slowdown, new O&G capex delays, return of trade war, geopolitical instability, and worsening of cash cycle.

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

*CMP is as per report published date

Click to download the full The Anup Engineering Ltd Q3FY26 Company Update

Analyst:

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

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FAQs on The Anup Engineering Ltd Q3FY26 Company Update

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

1. What is MNCL’s rating on The Anup Engineering?

MNCL has upgraded the stock to BUY with a target price of ₹2,515, implying ~30% upside from the current levels.

2. What is the key investment thesis?

The investment case is driven by improving execution, a resilient balance sheet, policy tailwinds, and expected recovery in industrial capex supporting growth over FY25–28E.

3. Why are order inflows an important monitorable?

The current order book remains soft, and a sustained recovery in order conversion from the strong enquiry pipeline will be critical for earnings visibility.

4. What are the growth expectations?

MNCL estimates revenue/EBITDA/PAT CAGR of ~18%/15%/11% over FY25–28E, supported by capacity expansion and improving demand.

5. What are the key risks to the outlook?

Major risks include global economic slowdown, delays in oil & gas capex, geopolitical uncertainties, trade disruptions, and deterioration in the working capital cycle.

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