Brokerage Bets On This Small-Cap Forgings Stock For 23% Gains, Gave 160% Returns In 5 Years

A well-known brokerage firm, CD Equisearch Pvt Ltd in its latest report on MM Forgings Ltd giving, recommends 'buy' for a target price of Rs 1,080 per share. MM Forgings is a manufacturer of automotive components. It manufactures steel forgings in raw, semi-machined and fully machined stages in various grades of carbon, alloy, micro-alloy and stainless steels.

CMP, Target Price, Returns & Performance, and Other Details

The current market price (CMP) of Gland Pharma Ltd is Rs 882.25 per share at the time of writing, opened at Rs 885 per share. The was closed yesterday at Rs886.15 on NSE. The stock hit the 52-week low on 03 February 2022 at Rs 645 per share, while the 52-week high touched on 11 April 2022 at Rs 989 per share. Currently, it is trading above Rs 237.25 from its 52-week low levels and nearly Rs 106.75 below its 52-week high level, respectively.

The Return on Equity (ROE) of the stock is 16.26%, and TTM EPS is Rs 44.43. PE Ratio is 19.80. The P/B ratio is 3.80. Its face value is Rs 10. The dividend yield is 0.68. It is a small-cap stock with a market capitalization of Rs 2,123 crore.

The share price of the company moved down nearly 0.62% in the last 1 week and 1.68% in the past 1 month, respectively. In the past 1 year, it has given 13.41% and in 5 years whopping 162.02% returns, respectively.

According to the CMP and the estimated Target price of Rs 1,080 per share, the stock has the potential to Jump 23% in 12 Months.

 

Business Update

As per the data published by SIAM, after having sharply corrected for two years from its peak in FY19, sales in both the passenger and commercial vehicles sectors have rebounded in FY22 on a low base, while the 2-wheeler sector, yet again has posted a third year of double-digit decline. Similarly, revenues for MM Forgings, which derives over 80% of its top-line from CV players, in FY20 was impacted by slowdown in the auto industry especially in domestic market, while FY21 was impacted by covid-19-led demand disruption. However, the cyclical upswing in FY22 provided much-needed respite that allowed it to rake in overall turnover of Rs. 1104.64 crs, a growth of 52.2% year-over-year. Export sales booking, which accounts for almost 50% of the total mix, grew by over 50% in the concluding fiscal.

MM Forgings Q4F22

Operating profits in FY22 also grew apace the top-line raking in Rs 201.74 crs, a growth of 66.3% as against Rs. 121.29 crs in the prior fiscal. However, consequent inflation in commodity prices, especially steel which grew by some 30% last year, to some extent impacted profits. Though helped by a lower base, operating margin in FY22 improved by some 150 bps to 18.3%, yet sequential decline of 150 bps in Q4FY22 shows some challenges in passing on of price increases to OEMs. Moreover, despite record volume offtake in FY22, the company seems to have benefited little from its operating leverage.

Brokerage suggests 'buy' for a target price of Rs 1080 per share

The stock currently trades at 18.1x FY23e EPS of Rs. 49.1 and 16.4x FY24e EPS of Rs. 54.29. Earnings growth in the coming years rests on the premise that the cyclical upswing in the commercial vehicle market would gain pace without being much tapered by the fears of global recession. Moreover, growing forays into the machining business, new product approvals by the OEMs and rising volume offtake in existing ones would also play a major role in determining the next leg growth. Earnings in FY23 are expected to grow by some 29%, before advancing by 10.8% to Rs. 131.06 crs in FY24 (vs. Rs. 91.76 crs in FY22). Yet, near unpredictability of CV cycle globally could have adverse ramifications on our earning projections. On balance, we assign buy rating on the stock with target price of Rs 1080 (previous target Rs 936) based on 20x FY24e earnings.

Disclaimer

The stock has been picked from the brokerage report of CD Equisearch Pvt Ltd. 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 taking any investment decision.