Buy This Small Cap Stock, Shares Can Surge 21%, Says LKP Research

LKP Research has assigned a "buy" tag on Tega Industries Limited (Tega) stock with a target price of ₹664 per share. If the stock is purchased at the current market price. If the stock is purchased at the current market price, it can give up to 21% returns on the investments. Tega Industries Limited is one of the leading manufacturer of specialized 'critical to operate' and recurring consumable products for the global mineral beneficiation, mining and bulk solids handling industry. Tega is a small-cap company having a market cap of ₹3,648.44 crore.

Current Market Price, 52-Week Low & High, and Returns

The shares of Tega on NSE last traded at ₹550.35 per share. The shares have fallen 0.11% from the previous close of ₹550.95 per share. Its 52-week high level is Rs 767.70 and 52-week low level is ₹397, respectively.

Tega shares made its debut on the stock market on 13 December 202. Since the date of listing it has given 24.2% negative returns on investments. The stock in a week has fallen 1.89%, and gained 4.12% in 2 months, respectively. 

Strong quarter, momentum continues

Tega Industries reported strong results better than expectations despite unfavorable challenges. Sales saw 19.7% growth at ₹2,762 mn and robust sales growth was seen across geographies. Company's diversified products continue to do well with its marquee product - Dynaprime leading its growth dynamics, witnessing 32% growth in H1FY23 while its NonDynaprime portfolio grew 20% in H1. With easing freight costs and normalization of container availability, margins expanded 254bps while EBITDA improved 37.5% YoY. Further, operating leverage enhancing profitability these evident from margin expansion both in annual (+57.4% YoY) and sequential terms (56.2% QoQ). 

Management expects the momentum to continue across its product lines specially Dynamprime where company is targeting above +25% CAGR growth as it sees better order booking across different geographies apart from Latin America. Order booking during the quarter remained strong at ₹3.5bn while the overall pending order book stands at ₹16.5bn showing strong revenue visibility ahead. On margins, management indicated that its margin ambition is to be between 21-23%. 

Buy for a target price of Rs 664 per share

"Overall, we remain positive on Tega, given the performance in H1FY23 and strong growth prospects ahead further substantiated by the fact that it has diversified product portfolio coupled with introduction of new products - DynaPrime liners opening opportunities in global steel mill liner market for conversion, 2) strong relationships with customers (>10 years) with sticky customer base 3) de-risked business model due to low customer concentration"  the brokerage has said. 

It added, "We have tweaked our revenue and margins nos. given the strong performance in H1FY23 and strong visibility ahead. We expect the company to deliver sales/EPS CAGR of 18%/26% over FY22-24E. We maintain BUY on Tega with a revised price target of ₹664."

Disclaimer

The stock has been picked from the brokerage report of LKP Research. 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.