Auto Stock Below Rs 500: 125% Gain From 52w-Low, Target Rs 505; Buy?

With a market valuation of Rs 8,480 Cr, Varroc Engineering Ltd is a mid-cap company in the automobile sector. Global tier-1 automotive component manufacturer Varroc directly supplies OEMs of passenger vehicles, commercial vehicles, two- and three-wheelers, off-highway vehicles ("OHV"), plastic and polymer components, and precision metallic components to manufacturers throughout the globe. It designs, manufactures, and supplies exterior lighting systems. One of Dalal Street's multibagger stocks is Varroc Engineering, which has delivered a 118% return over the past year. Nonetheless, Axis Securities has seen more potential in the stock, ranging from 11% to 15%, with a target price of Rs 595-613 after the stock has gained 124% from its 52-week low.

Varroc Engineering Share Price Target

Buy range: 540-530, target: 595-613, trend reversal: 505, upside: 11%-15%

"Varroc demonstrated a significant breakout above the neckline of the "Inverted Head & Shoulders" pattern at 520 with a robust bullish candle, signaling a potential shift from a downtrend to a positive trajectory. The heightened volume activity witnessed at the breakout further amplifies market participation, reinforcing the significance of the breakout. The stock's ability to maintain levels above key short and medium-term moving averages (20, 50, 100, and 200 days) signals a positive bias in its trajectory. The daily Relative Strength Index (RSI) remains in bullish territory, holding above both its reference line and the 50 mark, reinforcing a positive bias in the stock. Following the breakout from the Inverted Head and Shoulders pattern, the stock is anticipated to rally towards previous swing highs, setting our targets at 595 and 613," said Axis Securities in a note.

Varroc Engineering Financials

On a standalone basis, the company reported net sales of Rs 1,169.52 crore in the December 2023 quarter up 20.09% from Rs. 973.84 crore in the December 2022 quarter. Its net profit stood at Rs. 304.20 crore in Q3FY24 up 160852.38% from Rs. 0.19 crore in Q3FY23. EBITDA reached Rs. 113.73 crore up 35.54% from Rs. 83.91 crore in the same quarter of FY23.

Disclaimer

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