Harsha Engineers International (HARSHA IN) – Q1FY27 Result Update – Decent Q1; Overseas recovery key to watch – Upgrade to ‘ACCUMULATE’

Harsha Engineers International (HARSHA) reported a decent Q1FY27 performance, with consolidated revenue growing 25% YoY, led by robust India Engineering growth and broad-based industrial demand. Management expects India Engineering to grow ~15%YoY and consolidated revenue by ~12% YoY in FY27, with sustainable margins of 20–22%. Raw-material inflation and ramp-up costs impacted margins, though pass-through is expected to support recovery. Cages remained a key growth driver, while bushings and stampings grew 35% and 31% YoY, respectively, with ~30% growth targeted for FY27. Large-size cages offer further growth potential, with management targeting ~50% growth. Japanese customer sales grew 25% YoY, though FY27 growth is expected at ~10% given longer conversion cycles. Advantek remains in ramp-up mode, targeting Rs1.4bn revenue and breakeven by FY27-end. China remains profitable with ~10% growth expected, while Romania continues to weigh on profitability despite ongoing mix and cost-improvement initiatives. Solar EPC is expected to deliver ~Rs2bn revenue at 7–8% EBITDA margin. Overall, strong demand across cages, bushings, stampings and exports, alongside capacity expansion, supports medium-term growth, although raw-material volatility, ramp-up costs and overseas losses remain key monitorables. The stock is currently trading at a P/E of 20.7x/17.8x on FY27/28E earnings. We upgrade our rating from ‘HOLD’ to ‘Accumulate’ given recent correction in the stock price with a revised TP of INR461 (same as earlier earlier), valuing the company at a PE of 20x Mar’28E (same as earlier).