Shares of Ramkrishna Forgings are among the multibagger stocks of this year that has given around 151% return in year-to-date (YTD) terms. Ramkrishna Forgings is among India’s largest manufacturer and exporter of CV forgings. Brokerage firm Emkay believes that the company is a play on CV upcycle in domestic and overseas markets.
The brokerage sees further potential upside on Ramkrishna Forgings share price of over 28% from current levels. It believes that improving macros, pick-up in infra-spending, and the recovery in replacement demand should drive a 30% volume CAGR in the underlying India MHCV industry in FY21-24E.
Emkay has initiated coverage on the multibagger stock with a Buy rating and a target price of ₹1,530 per share, and as per the brokerage, the stock’s further upsides to its target price may come from continued order wins and acquisition of ACIL which may add to the fair value. However, it said that key downside risks are delay in auto sector/macro recovery, client concentration risk and adverse currency.
“The company, founded in 1981, has been a growth leader with revenue/EBITDA CAGRs of 12%/13% in the past 10 years, outpacing the industry and its larger peer Bharat Forge,” Emkay said in a note.
Historically, RMKF has outpaced industry growth, driven by customer additions and higher content per vehicle. The company has been able to meet the quality and cost requirements of marquee customers, resulting in market share gains in India, the US and Europe. RMKF is also expanding its presence in the LCV segment, and in the Industrial segments such as Railways, Oil & Gas and Construction Equipment, the note stated.
Emkay expects Ramkrishna Forgings to deliver a topline CAGR of 33% with revenues reaching ₹30 billion by FY24E on CV upcycle and improving share in the domestic and overseas markets. Incremental revenue of up to ₹5 billion is expected in FY23E/24E from recent order wins, it added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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