Ramkrishna Forgings Ltd : Healthy order book, strong export performance; maintaining a Buy - Anand Rathi Share and Stock Brokers
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Buy Ramkrishna Forgings Ltd For Target Rs.287
RK Forgings continued to grow strong during the quarter. Growth was driven by volumes and value addition. Geographically, domestic sales and exports continued to outperform the industry and management expects similar momentum to prevail in the near term. The order book is still robust and the company continued to win orders from North America and Europe. The outlook for commercial vehicles is strong; accordingly, we maintain our Buy rating with a TP of Rs287 (14x FY24e)
Strong overall performance. Q1 FY23 revenue grew 56% y/y, but declined sequentially 5% to Rs6.5bn. Domestic revenue grew 110% y/y to Rs4bn, while exports grew 13% y/y to Rs2.5bn. The company won orders of Rs3.9bn (four contracts) from America/Europe with an estimated execution period of 3/5 years. For EVs, it is aiming at business of ~3% of FY23 revenue, and 6% by FY24. For Railways, it expects revenues to double in FY23 to ~Rs1bn on recent tendering.
Domestic demand for CVs continues to grow strong. Volumes continue to be robust across M&HCVs and LCVs and has picked up consistently m/m, fuelled by demand in sectors like mining and cement almost back to pre-Covid levels. Also, it is diversifying into PVs in the near term, which augurs well for long-term growth. Hence, we expect 24% growth in FY23, and 12% in FY24.
Margin pressure to ease. During the quarter, the EBITDA margin was unchanged at 22% sequentially. We expect margins to improve in subsequent quarters as capacities are ramped up. Also, the company continues to have a strong order book, a better product-mix and rising content per vehicle. Accordingly, we expect margins of 23.7% in FY23, and 24.4% in FY24.
Valuation. We expect 18% revenue CAGR over FY22-24, and 26% growth in earnings, leading to Rs20.5 EPS. We maintain our Buy rating, with an unchanged TP of Rs.287 (14x FY24e).
Risks. More-than-expected revenue in FY24 and FY25.
To Read Complete Report & Disclaimer Click Here
Please refer disclaimer at https://www.rathi.com/LeadGenerate/Static/disclaimer.aspx
SEBI Registration No.: INZ000170832
Above views are of the author and not of the website kindly read disclaimer
