Dolat Capital is bullish on Sterling Tools has recommended buy rating on the stock with a target price of Rs 477 in its research report dated February 22, 2018.
Dolat Capital's report on Sterling Tools
Sterling Tools (STL) continues to strengthen its relationship with OEMs enabling it to expand product portfolio. Higher grade / specialised fasteners proportion are on a constant rise and margin expansion was the logical outcome. We expect the proportion of specialised fasteners to rise gradually for the foreseeable future. Volatility in raw material prices can impact margins for a couple of quarters as the raw material impact is passed on with a lag. Meidoh tie up will open up significant opportunities for STL. The capacity augmentation through a greenfield capacity in Karnataka will support revenue growth. As the stock has corrected to certain extent, this can be considered a buying opportunity from a 12 month plus perspective. Recommend BUY with a TP of ` 477.
OutlookWe believe that it’s a structural story and with new products getting added, STL would grow faster than the industry along with margin expansion. The return ratios remain strong and will support expensive valuations. Due to the recent correction, we believe this can be a buying opportunity from a long-term perspective. We recommend BUY with a target price of ` 477.
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