Smallcap Stock To Buy: Axis Securities initiates coverage on Skipper Ltd, Rs 600 target implies 44% upside

Axis Securities Initiates Coverage on Skipper Ltd: Brokerage Axis Securities on Monday initiated coverage on transmission and distribution (T&D) structure manufacture Skipper Ltd (SKIPPER), part of the BSE SmallCap index, with a 'buy' rating. Analysts at the brokerage are positive on Skipper Ltd, citing the company's status as the country's "largest and the world's only integrated transmission and distribution (T&D) player" that is "uniquely positioned to capitalise on the rising demand in the sector". 

The brokerage suggests adding Skipper Ltd to the investment portfolio to capitalise on the upside potential in the evolving transmission and distribution (T&D) landscape. 

Skipper Ltd’s strong market positioning, growth trajectory, and operational efficiency present a compelling investment opportunity, according to Axis Securities.   

Here are a few key things to know on how Axis Securities views Skipper Ltd now:  

T&D Capex Wave: The company's presence across the entire transmission chain, from manufacturing to EPC execution, gives it a competitive edge. Skipper looks well-positioned to benefit from the projected Rs 4.75 lakh crore T&D capex under the National Electricity Plan, according to the brokerage.

With the growing need for enhanced power infrastructure, Skipper Ltd’s strategic positioning is expected to ensure it rides the T&D wave effectively.

Strong Orderbook & Bidding Pipeline: The company has a healthy order book of Rs 5,844 crore across domestic, international, and non-T&D sectors, and a bidding pipeline of Rs 18,000 crore, out of which, Rs 11,500 crore pertains to international T&D orders.

Capacity Expansion: Operating at 90 per cent utilisation, Skipper Ltd is expanding its capacity by 25 per cent to add 75,000 tonnes by Q1 FY26, positioning it to meet growing demand, according to the brokerage. 

Revenue Visibility: Skipper Ltd’s management has given a strong guidance of 25 per cent revenue CAGR over the next three years.

With an order book of 2.1 times its FY24 revenue from the engineering and infrastructure segments, the company's robust pipeline offers clear revenue visibility, according to Axis Securities.

Margin Expansion: Skipper Ltd has consistently maintained EBITDA margins to the tune of 9.7-9.8% in recent years.

Its margin is projected to expand to 10.5-11 per cnet in the coming years, enhancing its profitability, according to the brokerage, which forecasts the company's revenue, EBITDA and PAT CAGRs at 25 per cent, 30 per cent, and 55 per cent respectively over FY24-FY27.

Valuation: Axis Securities has assigned a price-to-earnings (PE) multiple of 22 times the FY27 earnings per share to Skipper Ltd, citing strong sectoral tailwinds, capacity expansion plans, a robust order book, and improving margins.

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