Citing a potential cyclical rebound for GMM Pfaudler, domestic brokerage firm Ambit has initiated coverage on the stock with a "Buy" rating and a 24-month target price of Rs 2,400, suggesting a substantial 89% upside for the stock.“GMM trades at 30x FY26E P/E (12x EV/EBITDA), a 25-35% discount to its peers given earlier growth/margin issues due to deceleration in end-user capex. Valuations should re-rate with end-user capex uptick driving earnings rebound. We bake in 9%/12%/14% rev/EBITDA/FCF CAGR and expect GMM to scale 5x over FY24-41E (7x, FY19-24),” said Ambit in its report.GMM has a global dominance in the niche glass-lined equipment industry, mainly used in corrosive chemical processes across the pharma and chemical industry. The GLE industry (>$2 billion USD) is oligopolistic, with GMM Pfaudler (acquired Pfaudler), HLE Glascoat (acquired Thaletec), DDPS, and 3V Tech being key players.The company also sees a growing dominance in non-GLE using acquisitions for diversification. This acquisition-led diversification has reduced dependence on the chemical/pharma sectors to 60% (compared to >90% pre-Covid). “GMM has a track record of scaling and improving the margins of acquired entities (Pfaudler: 13% revenue CAGR; +6 percentage points EBITDAM over FY20-24), driving operational efficiencies, insourcing, and cross-selling,” Ambit noted.Also read: TCS shares rally 5% after Q3 profit rises 12% YoY. Should you buy, sell, or hold?GMM (India business) clocked a 25% revenue CAGR over FY16-23, led by a capex uptrend across the chemical/pharma sectors. However, growth slowed in FY24/25E given muted end-user capex. Meanwhile, the non-GLE business increased to >50% of FY24 standalone revenue (30% in FY19) amid accelerating end-user capex.“Capex pick-up across pharma/chemical companies will drive growth in the GLE business,” the domestic brokerage firm added.The shares of GMM Pfaudler were trading 1.4% higher at Rs 1,232.90 on the BSE around 3 pm today.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)