Gala Precision soars 35% in 3 days; zooms 180% over issue price in 4 months

Shares of Gala Precision Engineering hit a new high of Rs 1,480.80, surging 9 per cent on the BSE in Friday's intra-day trade, extending its past two days' rally.

Gala Precision Engineering (GPEL) shares hit a new high of Rs 1,480.80, surging 9 per cent on the BSE in Friday’s intra-day trade, and extending its rally of the past two days on a healthy business outlook. In three days, the market price of the industrial products company has soared 35 per cent. It has zoomed 180 per cent against its issue price of Rs 529 per share in four months. The company made its stock market debut on September 9, 2024.

 

Gala Precision is a leading manufacturer of special fastening solutions (SFS) like high tensile fasteners including studs, anchor bolts, cross bolts, hex bolts, nuts, Gallock wedge lock and grip lock washers, as well as disc & strip springs (DSS) and coil & spiral springs (CSS), comprising of an extensive portfolio of 750+ stock keeping units (SKUs).

 

 

The company supplies its products to original equipment manufacturers (OEMs), Tier 1 and channel partners; they are used in sectors like renewable energy, including wind turbine and hydropower plants, various industrial sectors like electrical, off-highway equipment, infrastructure and general engineering, along with mobility segments such as automotive and railways.

 

GPEL has a strong customer base with stickiness in products as it meets stringent specifications and technical requirements, reliability in supplies, and cooperation with German and Indian institutes for new product development. Key customers include Vestas Wind Technology India Private Limited, L&T Electrical & Automation, Schneider Electric, and Brembo Brake India Private Limited.

 

The installed capacity for DSS is 225.5 million units, with an 85 per cent utilisation rate, contributing to 59.5 per cent of the company's total revenue in the financial year 2023-24 (FY2024). The installed capacity for CSS is 20.9 million units, with a 78 per cent utilisation rate, contributing to 20 per cent of the company's total revenue in FY2024.

 

Growth in coil spring assistance, one of GEPL's products, and an essential component for suspensions, engines, clutch, seat recliners and in-cabin shock absorbers in vehicles, resulted in significant growth of the coil spring market. Upgradation of Indian railway system to high-speed rail and increased investment in metro rail has also been instrumental in fueling demand for railway infrastructure and other components.

 

That apart, renewable sources are projected to contribute 95 per cent to the increased global power capacity from CY21-26. Rising demand for renewable energy will also lead to an increased need for fasteners used in building wind turbines, hydroelectric plants, and solar farms. Various governments are focusing on replacing old infra with modern infrastructure thus fueling demand for fastening solutions, GPEL said.

 

In the first half (April to September) of the financial year 2024-25 (H1FY25), GPEL had reported a 17 per cent year-on-year (YoY) growth in profit after tax at Rs 11.7 crore. Revenue from operations grew 9.1 per cent YoY to Rs 104.4 crore. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin improved 84 bps to 19.4 per cent. 

 

GPEL is poised to leverage its strong foothold in the precision components industry amidst a favorable market environment marked by robust growth in the renewable energy and automotive sectors. The company has demonstrated impressive financial performance, with a compound annual growth rate (CAGR) of 18 per cent in revenue from FY 2022 to FY 2024, stable gross profit margins and 57 per cent CAGR in PBT and exceptional items during the same period, from Rs 11.2 to Rs 27.6 crore, showcasing strong financial health and operational efficiency, according to KRChoksey Shares and Securities.

 

Strategic investments in new manufacturing facilities in Maharashtra and Tamil Nadu have enhanced the company's production capacity and export capabilities, while inhouse design and technological advancements provide it a competitive edge. The expansion of its manufacturing facilities and the introduction of new products will enable the company to capture additional market share in both domestic and international markets, the brokerage firm had said in the company's IPO note.