Buy MM Forgings on decline: Mayuresh Joshi

Mayuresh Joshi of Angel Broking told CNBC-TV18, "If you look at the business verticals of MM Forgings, clearly it caters to the automobile industry and again in terms of segmental contributions, oil and engineering products are contributor or 22 percent. The automobile segment itself contributes around 78 percent. The management has been extremely cautious in increasing its capacity from 40,000 mt to 65,000 mt. They have done that in phases to take care of how that sales numbers and the topline is growing. They do not want to lag behind in terms of how their capacity utilisation levels are panning out.""Clearly, in terms of how sales are panning out, 72 percent of its topline comes in from exports and it caters to the commercial vehicle (CV) industry. In terms of a geographical presentation, US contributes almost 39.3 percent, Europe contributes 10.6 percent and Europe CV sales have seen some amount of update. So specifically in countries like UK, Spain and Italy and when it comes to the US region, it has done pretty well. If one assumes and goes by the data points out there, we presume that the CV sales will see a humongous amount of an uptrend going forward. If you talk about EBITDA margins, it will pan out for the company, I don’t think with commodity prices coming down, the EBITDA margin should be in 21.6 to 22 percent kind of a range," he said."If you look at the topline, the management has taken a very conservative approach in assuming topline growth 10.6 percent on compounded annual growth rate (CAGR) basis over the next couple of years close to Rs 615 crore mark. Clearly, the profitability margins should improve to the 11 percent mark. The debt equity ratio which stands at 0.4 including cash flows because of the rupee depreciation will have impounding effect in terms of how topline realisations will improve. So the bottomline should come anywhere close to 6-7 crore and valuation wise it is looking extremely attractive.""If you check with Ramkrishna Forgings on an EV to sales of 1.4 MM Forgings compared with Ramkrishna Forgings at 2.4 times EV to sales, it looks quite attractive. So on price equity comparison, at 9.3 times it looks extremely lucrative. So I think any decline from the current level becomes a good buying opportunity, we have got a target of Rs 614 over the next 12 months.""On the four-wheeler side we clearly like Maruti Suzuki and the product mix has been exceptional for the company. Any decline becomes a good buying opportunity for the stock. We remain optimistic on that space.""Within the two-wheeler space, Bajaj Auto is something that we like. I think the export contribution, which is around 50 percent and again the kind of sluggishness that we have probably seen in African markets should improve over the next few quarters and even on the domestic side, the market share which it has lost, if it is able to regain that with fall in commodity prices, if the EBITDA margins are sustained around 21 percent mark, Bajaj Auto also becomes an accumulative stock for us on every decline from the two-wheeler pack," he said.