NTERARCH and Pennar industries are set to grow at a good pace for next many quarters to come. Pennar does PEB for US markets as well where margins are very high
While Inter is delivering 50% growth in north India by the end of Q2 PENNAR has also commissioned a plant in Raibareli UP. Both Inter and Pennar are expected to deliver very good earnings growth for next 6-8 quarters.
Both should give steady returns to investors
This one was by e pack but Pennar is doing almost the same thing and that too on US Soil which makes it a larger TAM
Pennar Ind to form JV with Zetwerk Mfg & others for mfg & sale of solar modules
Adding my notes on the company.
Pennar Industries Limited (PIL) is a leading engineering building company headquartered in Hyderabad. It has presence in India, US and France and offers a dive portfolio to six key sectors - infrastructure, automotive, railways, construction, general manufacturing, white goods and solar.
PlL has 13 manufacturing facilities in India, in the states of Telangana, Tamil Nadu, U.P., Maharashtra and 3 facilities outside.
They cater to all the B2X segments.
They have 2 main sources of revenue -
They are strategically shifting from low margin to high margins and to do so, have identified 5 growth verticals:
We can divide their product verticals into commodity and VAP segments
Commodity
Value Added Products
There are lot of clear indications of margin expansion along with a more diverse product space and International exposure with higher margins. As others have mentioned, need to track the implementation by the management along with how fast are they exiting the low margin business.
Disclosure: Tracking it very closely
I don’t think WIL business is 2K crore in hydraulics segment. As per the annual report FY24, hydraulics generated ~160Crs and management clarified to double this segment in 2 - 3 years as the demand is robust. Below snippet from AR about Sundaram Hydraulics.
cc: @Sridharj
Yes that’s there overall revenue. I also had check that they had 150cr from hydraulics however their total revenue is around 2k crores. It could be possible that WIL is not the market leader?
Can anyone explain if PEB players have any moat? Can any steel player enter the PEB space?
Results announced
Q3FY25 Standalone and Consolidated Financial Results.pdf (2.7 MB)
Some Key pointers captured from the call on Growth
Segment-Specific Growth Projections:
PEB India and US (Ascent Buildings): PEB sector to be a major growth engine. Both the India and US PEB businesses will grow strongly. Raebareli plant and planned US greenfield capacity expansion are key drivers. Strong order books in both geographies validate the growth potential. Should see qoq growth hereon in PEB revenue.
Body in White: BIW is another significant growth area with good future potential. They expet it becoming a ₹1,000 crore business over the next few years, and current progress already above ₹100 crore marks a good starting point. Customer acquisition (Stellantis, Hyundai, Kia, Maruti etc.).
Diversified Engineering & Custom Building Solutions: These segments are already seeing growth and are expected to continue contributing to the overall revenue expansion.
Tubes (Longer Term & Niche Focus): Growth in the tubes business is approached more cautiously. While they see potential in niche, high-margin segments like large diameter and precision tubing, scaling this business is expected to be a more gradual process. Large diameter tubing, in particular, needs time for CAPEX investments to materialize and contribute significantly to revenue. Hence, tubes are not currently viewed as a primary short-term growth vector, but medium-term.
Engineering Services: Mentioned as a growth vertical, will be driven by outsourcing trends, especially design engineering for US clients.
Hydraulics: Expected to maintain a steady performance but growth narrative is more related to efficient restructuring for better reporting rather than rapid expansion.
4. Geographic Growth - India & US Markets:
India Market (Primarily PEB & Diversified Engineering): India remains a crucial market. Growth in India will be significantly driven by PEB sector and diversified engineering businesses. The Raebareli plant is designed to tap into the growing Indian market for pre-engineered buildings.
US Market (Ascent Buildings/PEB US & Hydraulics): The US market, primarily through Ascent Buildings (PEB) and hydraulics, is a major area for expansion. Strong order book in US PEB signals robust growth. Capacity expansion plans (greenfield plant) are directly targeting the US market.
Margin improvement to 7% in PEB space expected in relatively short-term. Overall company margin improvement to 7% and then 10% targeted over medium-term.
35% of current revenue from de-prioritized businesses; expected to reduce substantially YoY to near zero within 5 years. This is expected to be the key driver for margin improvement and cash generation.
Overall growth guidance is double-digit CAGR growth. PBT margins to reach 7% but no specific timeline commitment.
Valuation:
Growth & Margin: Assume 10% CAGR growth for next 2-3 years (FY27-28). Project 6.5% PBT margin (below 7% guidance).
EPS Projection: FY27 EPS ~ ₹14, FY28 EPS ~ ₹16 under these assumptions.
Current Valuation: Stock at 10-11x forward PE (FY27).
Potential Upside: 15x exit PE by FY27 end → ~20% CAGR return.
High Upside Scenario: If execution strong, ROIC improves, and market awards 20x exit PE → potential to double in 2-3 years.
Question: Is 10x forward PE entry + potential 15-20x exit PE re-rating a reasonable investment calculation?
Overall management seems to be optimistic. Though the capital investment in JV is not big, need to see the quantum of losses JV can have in the initial years. Any big surprise can impact bottom line of Pennar.
Disc: Invested and biased.
See the total investment for them here is 18crores and they are almost hinting that they will sell off their solar epc/arm eventually at profit. They are not providing management bandwidth here to this smallish bet/vertical.
^ This clarification was in depth and almost the very first question addressed in the concall. We can sideline this and focus on things like PEB and US arm for PEB.
2.2% is disputed of the total trade receivables. Doesn’t look that risky.
I was referring to credit impaired trade recievable its like 97 crore
Oh, thats true 25% of total receivable is very high. Need to be put up in next Concall.
It is 20% but yeah still major portion.
Can someone please highlight why we one should choose Pennar over let’s say Interarch or others? What’s the advantage that Pennar has in terms of anything.. Be it geographical, client relation or whatever..
Thanks!
Backward Integration- Manufactures its own steel components, tubes, beams, etc., unlike many PEB players who buy from others. Higher margin and more stability.
In-house Design - Pennar has a dedicated design and engineering team which give customised solution.
Pennar has big clients like L&T, Siemens, GE, Tata Projects, JSW, Indian Railways. Long-term relationships in sectors like railways and infra give it a sticky revenue base.
Manufacturing plants in Telangana, Tamil Nadu, Maharashtra, and Gujarat
US PEB, the base is small but growth opportunity is higher due cost effectiveness. can offer lower price then competitors. Profit margin will also be higher as they make components in Indian and erect them in US.
