Prabhudas Lilladher has reiterated an 'Accumulate' rating on Harsha Engineers with a target of Rs 462. While the company saw strong revenue growth of 25% in the first quarter, profit margins faced pressure due to rising costs and foreign exchange losses.
Prabhudas Lilladher has reaffirmed its 'Accumulate' rating on Harsha Engineers International, setting a target price of Rs 462. This brokerage outlook follows the company’s first-quarter results for the 2027 fiscal year, which highlighted a strong rise in sales but also reflected challenges in maintaining profit margins due to rising costs.
In the first quarter, Harsha Engineers reported a 25.2% year-on-year increase in consolidated revenue, reaching Rs 457.43 crore. This growth was largely supported by the company’s India Engineering division, particularly in the production of bushings and stampings, which saw significant volume increases. Management remains focused on long-term expansion, with ongoing capacity additions in both India and China.
However, despite the jump in revenue, the company’s consolidated net profit dipped by 1.4% to Rs 37.38 crore during the same period. The key reason for this decline was a contraction in operating margins, which fell to 16.6% from 18.7% in the previous year. This margin pressure was driven by a combination of higher raw material costs and roughly Rs 4 crore in foreign exchange losses. The company is now working to manage these costs through price adjustments and internal efficiency improvements.
Investors should be aware of several operational factors that could influence future performance. The company’s Advantek division is a key area of focus, with management aiming for the business to reach break-even by the end of fiscal year 2027. Additionally, the company faces persistent profitability challenges at its facility in Romania, which remains a drag on overall performance despite recovery efforts.
Another significant point for investors is the company’s customer concentration. Approximately 80% of its revenue is generated from its top 10 customers. While this indicates strong, long-term relationships with key industry players, it also creates reliance on a small number of clients.
Going forward, the market will likely track the company's ability to improve margins as raw material inflation stabilizes and the Advantek division moves toward profitability. Success in turning around the international operations in Romania and maintaining high capacity utilization in its core Indian plants will be important factors in the company's growth trajectory.