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Buy This Small Cap Industrial Equipment Sector Stock, Shares Can Surge Up To 21%: ICICI Direct
ICICI Direct is positive about Ador Welding Limited (AWL), a small-cap Industrial Equipment sector company having a market cap of Rs 1,142 crore. The brokerage has placed a buy call on the stock with a target price of Rs 1,015 apiece. According to the stock's estimated target price, investors purchasing the stock at the current market price could benefit from a 21% potential return in 12-18 months.
AWL is a leading player in the welding consumables (~19% market share), welding equipment, automation and projects business. Welding consumables contributed ~81% of revenue in FY22. AWL is expected to continue strong RoCE, positive free cash flow trajectory in consumables in comings years despite a challenging environment. Aims to reduce legacy costs in projects business to improve return ratios.
Stock Outlook & Returns on Investments
The AWL stock last traded at Rs 839.80 apiece on NSE, 2.95% down compared to its previous close. As per available data on NSE, the stock recorded its 52 week high at Rs 1,037 on 22 September 2022 and the 52 week low at Rs 586.15 on 25 February 2022, respectively.
In the past 1 week, the stock has given 2.49% positive returns. Whereas, in the past 1 month it has fallen, giving 4.51% negative returns. In the past 3 & 6 months, it has given 5.21% and 28.09% positive returns to shareholders. The stock over the past 1 year, gave 18.95% positive returns. Whereas in the past 3 years, it gave a multibagger return of 166.35% and in 5 years it gave 58.99% positive return.
Q2FY23 Results
AWL reported decent Q2FY23 results. Revenues came in at Rs 184.9 crore, up 15.9% YoY, 17.1% QoQ. EBITDA came in at Rs 15.2 crore up 16.3% YoY, aided by reduced losses in flares & process equipment business. Consequently, adjusted PAT was at Rs 10 crore, down 31% YoY.
ICICI Direct Suggests buy stock for Rs 1015 target price
Going forward, better consumables volumes, rebound in equipment sales and projects business turnaround to drive growth, profitability. "Considering strong growth outlook, margin revival, we maintain BUY rating. We value AWL at Rs 1015 i.e. 21x P/E on FY24E EPS," the brokerage has said.
Key triggers for future price performance
AWL aims to focus on core welding business, reduce legacy costs while streamlining projects business to regain growth and improve profitability. Domestic welding & automation business to focus on improving margins and realisations with cost rationalisation, enhance advanced product portfolio, improving strike ratio of order wins and optimised product mix. "Overall, we expect revenue, EBITDA CAGR of 15.8% and 26.3%, respectively, in FY22-24E with margins rebounding to 10.5% levels," the broekrage said.
Disclaimer
The stock has been picked from the brokerage report of ICICI Direct. 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.
