Industrial Automation And EV Demand Will Expand Bearing Solutions

Key Takeaways

• Capacity expansion and automation-driven demand position Harsha for structurally higher margins and recurring export-led earnings growth in core and emerging bearing segments.
  
• Regulatory shifts and product portfolio upgrades drive market share and price gains, supporting multi-year revenue growth and earnings resilience across new end-markets.
  
• Concentrated customer exposure, weak European demand, volatile input costs, slow international growth, and structural industry shifts threaten Harsha's earnings stability and long-term profitability.

Catalysts

Engages in the manufacture and sale of precision bearing cages in India and internationally.

• Analyst consensus is positive on the Bronze Bushing segment, but this may be significantly understated as capacity expansion at new greenfield sites positions Harsha to achieve compounded annual growth in excess of 30 percent in bushings, potentially setting a new baseline for recurring revenue and major gross margin improvement.
  
• Analysts broadly expect meaningful contribution from a long-term cages contract in FY26, however, with the acceleration of global industrial automation and new productionlines coming online, demand may outpace projections, supporting further upside for export-driven earnings and sustained high net margins.
  
• Harsha is positioned to be a prime beneficiary as global electric vehicle adoption and renewable energy infrastructure investments accelerate, expanding demand for specialized and precision bearings and enabling robust multi-year revenue growth across multiple new end-markets.
  
• India's increasing regulatory push for higher-grade, indigenously produced bearings signals a long-term market share shift away from lower-cost imports to high-value players like Harsha, which should structurally boost addressable market size and price realization, benefiting both top line and margin profile.
  
• The company's ongoing deepening of backward integration-combined with a portfolio shift towards higher value-add customized products-points to structurally higher average selling prices, better cost control, and more resilient earnings growth than the market currently implies.

Harsha Engineers International Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Harsha Engineers International compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Harsha Engineers International's revenue will grow by 12.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.3% today to 10.6% in 3 years time.
• The bullish analysts expect earnings to reach ₹2.1 billion (and earnings per share of ₹23.27) by about July 2028, up from ₹893.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 27.1x on those 2028 earnings, down from 41.3x today. This future PE is lower than the current PE for the IN Machinery industry at 34.3x.
• Analysts expect the number of shares outstanding to grow by 0.98% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.5%, as per the Simply Wall St company report.

Harsha Engineers International Future Earnings Per Share Growth

Risks

• The prolonged weakness and impairment in Harsha's Romania operations, along with reduced offtake from major European customers and continued exposure to uncertain European demand, raises the risk of future revenue stagnation or losses from this geography, with a direct negative impact on consolidated earnings.
  
• The consolidation of revenue from a few large customers, with significant wallet share attributed to key clients who have already indicated potential reductions or delays, exposes the company to significant earnings volatility and margin compression if a single relationship deteriorates.
  
• Volatile global steel input prices, as discussed in the text with recent margin improvements from pass-through timing, demonstrate that any reversal of favorable steel costs or inability to timely pass increases onto customers could squeeze gross margins and reduce net profits.
  
• The slow progress and multiple delays in gaining expected wallet share from Japanese customers, coupled with uncertain global industrial demand as signaled by management, could temper revenue growth, particularly if global economic conditions weaken or if Harsha underperforms in key international markets.
  
• Broad industry trends such as rapid electric vehicle adoption, commoditization pressures from lower-cost Asian competitors, regulatory requirements for greener manufacturing, and the emergence of advanced bearing technologies could structurally reduce long-term demand for traditional bearing components, threaten revenue, and compress already thin industry margins for Harsha over the coming decade.

Valuation

• The assumed bullish price target for Harsha Engineers International is ₹411.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Harsha Engineers International's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ₹19.9 billion, earnings will come to ₹2.1 billion, and it would be trading on a PE ratio of 27.1x, assuming you use a discount rate of 14.5%.
• Given the current share price of ₹404.75, the bullish analyst price target of ₹411.0 is 1.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.