Harsha Engineers Q3 Results Review - Subdued Performance; Steel Pipes Order Backlog Strong: IDBI Capital

IDBI Capital Report

Harsha Engineers International Ltd.'s delivered results below expectations. Profitability metrics came in below expectations. Revenue grew by 8% YoY owing to better performance from the solar segment.

Gross margins exhibited healthy improvement of 390 basis points QoQ to 45.9% owing to full effect of raw material pass through, cost reduction measures and rescaling of subsidiaries.

The overall demand outlook for Harsha Engineers has weakened in the last six months owing to sluggish overseas conditions which is a critical point considering the company derives 64-65% of revenues from outside India.

Geo political crisis, high energy prices and sharp rise in interest rates are impacting demand globally.

We lower our FY24/FY25/FY26 profit after tax by 11%/10%/11% to factor in lower growth and maintain our 'Hold' rating with target price of Rs 430 at 25 times FY26E expected earnings.

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