Brokerage firm Motilal Oswal Financial Securities (MOFSL) is bullish on Tube Investments of India Ltd on the back of robust recovery across segments and expectations of double-digit growth.
MOFSL has retained a 'buy' call on the stock and assigned a target price of Rs 3,560 per share, an upside of 11 percent from the closing price of June 22.
Here are some key indicators for the positive sentiment among the brokerage firm.
Double-digit growth in engineering business
Tube Investments' engineering business is projected to reach double-digit growth over the next 2-3 years, MOFSL said. Analysts at the broking firm said that this growth will be primarily driven by the recovery in the 2W (two-wheeler) segment, increased exports, and the ramp-up in large-diameter tubes.
In FY23, the company observed favourable growth in the first half but encountered challenges in the second half due to the pass-through of declining commodity costs and the impact of de-stocking on exports. To deal with increasing demand, the company is taking proactive measures by expanding its capacity by 50 percent. The facility is expected to be operational by the end of FY24.
Strengthening metal business
The metal vertical is forecasted to grow 10 percent in the next couple of years, analysts said. This growth comes despite the sluggishness in the Railway segment, which is yet to see any material increase in tender activity, as per Motilal Oswal's report published on June 22.
Also aiding growth is the door frame segment predicted poised to grow well in line with key customers. Further, the company is seeing good traction in other products for the 2W segment, the report stated.
Cycle business recovery
The domestic cycle business faced obstacles in FY23 as volumes declined by about 7-8 percent. Analysts have also pointed out that the company sharply underperformed its peers in the segment.
Analysts expect a certain degree of recovery in FY24 as the company's focus lies on exports. The brokerage firm foresees progress in cycle exports by the end of FY24.
Shares of Tube Investments of India Ltd ended at Rs 3,206.95 apiece on the NSE on June 22, up 1.12 percent from the previous day's close.
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