SPA Securities is bullish on Ramkrishna Forgings has recommended buy rating on the stock with a target price of Rs 710 in its research report dated November 29, 2018.
SPA Securities' report on Ramkrishna Forgings
Ramkrishna Forgings Ltd. (RKFL) reported net sales of INR 4615 mn in 2Q FY19 (36.4% jump over INR 3382 mn YoY) and a PAT of INR 328 mn (INR 235 mn YoY) on the back of pickup in both domestic and export volumes. Domestic/Export/Total realization for the quarter has improved by 15.3%/18.3%/15.8% while export contribution has decreased by 95 bps YoY to 21.3% (flat QoQ). EBITDAM has improved by 181 bps YoY despite lower contribution of high margin export business. RM cost as % of sales increased by 315 bps. Operating & Manufacturing Expenses as % of sales declined 274 bps YoY on the back of positive operating leverage. Results are largely in line with our estimates. We expect RKFL to register Revenue/PAT growth 19.9%/30.7% from FY18 to FY20E. At CMP of INR 558 the stock is trading at 5x FY20E EBITDA. We have reduced our FY20 EBITDA and EPS estimates by 5.6% and 6.1% respectively. We have valued RKFLs stock at 8x FY20E EBITDA and recommend BUY with a TP of INR 710 (INR 882 earlier) in 18 months.
Outlook
At CMP of INR 558 the stock is trading at 5x its FY20E EBITDA. We have reduced our FY20 EBITDA and EPS estimates by 5.6% and 6.1% respectively. We have valued RKFLs stock at 8x FY20E EBITDA and recommend BUY with a TP of INR 710 (INR 882 earlier) in 18 months.
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