International brokerage UBS initiated coverage on small-cap Ramkrishna Forgings, seeing a bullish outlook on the company as visible earnings drivers imply the chance for upgrades.
The Swiss brokerage issued a buy rating on the forgings player, with a target price of Rs 1500, indicating a whopping upside of 46 percent.
RK Forgings has a low single digit share in the global market, which indicates the company can a long runway for growth. The previous growth drivers also remain relevant. However, the firm's plan to transition from a pure forging company to a total assembly solution provider, expands the product portfolio via diversification and moves up the value chain.
For RK Forgings, the upcoming capacity expansion, client additions, key order wins and recent acquisitions provide earnings visibility.
According to the Swiss brokerage, the consensus opinion on RK Forgings does not factor in its capability or even its potential growth drivers.
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Ramkrishna Forgings was awarded a substantial business contract worth 8.25 million euros (approximately Rs 73.65 crore) by a prominent European OEM and Tier 1 supplier on August 30. As per the agreement, the company supply front and rear axle components for the next five years.
On August 24, the company won a significant business contract valued at 17.2 million euros (approximately Rs 156 crore) from a Eurasian customer in farm equipment’s industry. The contract extends over a period of 4 years, resulting in an annual contract valued at around 4.31 million euros.
The company is manufacturing forged products and has state-of-the-art manufacturing facilities at Jamshedpur. It is supplier to various sectors such as automotive, railways, farm equipment, bearings, oil & gas, power and construction, and earth moving and mining, both in India and the overseas markets.
Over the past year, shares of RK Forgings have risen around 57 percent, as compared to the frontline index Nifty 50's 12-month run of 27 percent.
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