A reputable brokerage firm, Anand Rathi, recently published a report on Nilkamal Ltd. and gave the stock a "buy" call with a target price of Rs 2,985 crore. The brokerage's target price indicates that the company's stock could surge by up to 46% in 12 months.
Nilkamal is a small cap plastics sector company engaged in the moulded furniture business. It has a market cap of Rs 3,079.19 crore. Nilkamal management expects 11-15% overall volume growth in FY23. It aims to double revenue in the next 5-6 years, with 12-15% margins.
The current market price (CMP) of the Nilkamal on NSE is Rs 2056.60. The 52 week low of the stock is Rs1,692.95 and the 52 week high is Rs 2,940, respectively. Its ROE is 6.93%.
It has given 3.34% negative return in the past 1 week, whereas, in the past 1 month, it has surged by 0.91%. In the past 3 months, it gave 7.79% positive return. However, over the past 1 year, it has given 27.37% negative return. In the past 3 and 5 years, the stock surged and gave positive returns of 67.03% and 33.06%, respectively.
Performance expected to be healthy
The demand environment seems encouraging. Price hikes in material handling would continue as earlier higher input costs were not fully passed on. In the furniture business, however, earlier price hikes have been adequate.
Raw material tailwinds expected by Q4
Volatility in key raw materials such as polyethylene and polypropylene continues. However, prices, which were softer in Jul/Aug, started firming up in Sep. Management expects a favourable pricing scenario from Q4 FY23.
Aims to be a one-stop home-furnishing-solutions provider
Plastic furniture has a small market size, while in non-plastic furniture the opportunity size is significant. Hence, after the Boston Consulting group report on the furniture business revamp, the company is striving to scale up the non-plastic furniture business.
Strengthening its manufacturing, marketing abilities in non-plastic furniture
Capex at Hosur for non-plastic furniture is progressing. On the land acquisition being completed by Dec, the facility is expected to be operational within 6-9 months, ie, Q1/Q2 FY24.
Outlook & Valuation
The demand environment looks encouraging. Input cost tailwinds would provide headroom for margin expansion. Hence, we expect 13% and 54% CAGRs over FY22-24 in revenue and earnings, respectively. "We have a Buy rating on the stock, with an unchanged TP of Rs.2,985, based on 22.5x FY24 earnings," the brokerage said.
The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.