Buy Ramkrishna Forgings; Target Of Rs 461: Dolat Capital Market
Dolat Capital Market is bullish on Ramkrishna Forgings has recommended buy rating on the stock with a target price of Rs 461 in its research report dated October 20, 2020.
Oct 21, 2020 / 01:06 PM IST
Dolat Capital Market's research report on Ramkrishna Forgings
Ramkrishna Forgings (RMKF) reported a decent set of numbers in Q2FY21 amid a challenging environment, led by recovery in both, domestic and export revenue and cost control measures. Despite contraction in gross margin, EBITDA margin remains flat YoY at 18.1%. Export revenue was Rs 1.13bn, (-1.4% YoY), driven by recovery in the North America Class 8/Class 5 truck segment and incremental revenue from Europe and South America. Domestic business de-grew 8% YoY at Rs 1.33bn despite sharp fall in M&HCV segment (-41% YoY), supported by increase in content per vehicle and incremental revenue from LCV division. Management stated that Exports are ramping up and revenue for FY21 is expected to be better than FY20 due to incremental revenue from South America and Europe. RMKF is focusing on expanding business across different geographies and customers with new capacities in place to cater to Railways, LCV and PV segments. We expect recovery in NA Class 8 trucks and domestic LCV volume to be key growth drivers in 2HFY21. However, challenges persist in the form of rising debt (increased to Rs 10.4bn from Rs 8.7bn in FY19).
Given the sharp recovery in the domestic CV and Class 8 trucks demand and incremental revenue from LCV business, we increase our EPS estimates by 71% for FY23E and upgrade our rating from Reduce to BUY with TP Rs 461 (based on 15x FY23E EPS).
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