Buy MM Forgings; target of Rs 125: Sunidhi Securities

Sunidhi Securities is bullish on MM Forgings and has recommended buy rating on the stock with a target of Rs 125 in its May 10, 2012 research report.

“Incorporated in 1946 as Madras Motors Pvt Ltd, MM Forgings went public in 1975. Originally dealing in imported motorcycles, it later diversified to establish steel forging plants in 1974. The company changed to its present name in 1993.”

“During FY11, sales advanced by 67.9% to Rs265.9 crore and net profit by 94.0% to Rs20.2 crore. OP and NP margin stood at 20.1% and 7.6% against 18.8% and 6.6% respectively in the corresponding period last year. EPS for FY11 stood at Rs16.7.The DER as at FY11 stood at 1.1:1 whereas the value of the gross block stood at Rs306 crore Vs Rs290 crore in FY10. During Q3FY12, sales rose 30.7% to Rs88.2 crore and net profit by 10.9% to Rs6.1 crore. (YoY). OPM and NPM stood at 17.0% and 6.9% compared to 20.7% and 8.1% respectively in Q3FY11. EPS for Q3FY12 stood at Rs5.0. During 9MFY12, sales 32% to Rs250.7 crore and net profit by 15.2% to Rs18.1 crore. OP and NP margin stood at 18.1% and 7.2% against 21.0% and 8.3% respectively in 9MFY11. EPS for 9MFY12 works out to Rs15.0 Vs (Rs13.0).”

“MMFL has manufacturing plants in three locations. All the three locations are well connected by road to the nearest sea port. MMFL has the strategic advantage of being able to ship from two major ports (Chennai and Tuticorin). Both these ports are equidistant from our Plants. MMFL has long standing contracts and association with major shipping lines. Founded on the tradition and philosophy of steadfast commitment to achieving "Total Customer Satisfaction" through excellent quality, on time deliveries and competitive pricing, MMFL has grown steadily in strength and stature to attain its present recognition of being one of the largest exporters of forgings in India in its product range and has created a niche in the international market.  With the global outlook for the automobile industry improving and more than 475 components under its portfolio, MMFL is expected to get huge growth opportunities  At the CMP of Rs96, the share is trading at a P/E of 4.8x on FY12E and 3.8x on FY13E. We recommend BUY with a target price of Rs125 in the medium term,” says Sunidhi Securities research report.   

Public holding more than 90% in Indian cos 

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