Revenue Grew To Rs 3.1bn, Buy This Metal & Mining Stock For Up To 30% Potential Gains: Anand Rathi

Anand Rathi, the brokerage firm has put a buy rating on the stock of MM Forgings Ltd for a target price of Rs 1021. The brokerage estimated the stock has the potential to gain close to 30% upside.

Stock Outlook

The brokerage has put a target price of Rs 1021 for 12 months. The stock today at Rs 805 per share. The Current Market Price (CMP) of the stock is Rs 787.45. The stock has fallen today. With the CMP and the target price set by the brokerage, stocks have the potential to witness 29.66% upside during the estimated time period. It has hit the 52 week low at Rs 471.30 on 1 June 2021, whereas, 52 week high on 11 April 2022. In the last 1 year, the stock has gained a significant percentage. Whereas, in last 1 week it has witnessed a fall.

The brokerage in its latest report has said, "Robust off-take in M&HCVs led to MM Forgings' strong revenue in Q4 FY22. Geopolitical tensions and the ongoing semiconductor shortage curbed exports, but, demand is strong in other key markets."

Robust Performance In the Next Two Years

According to the brokerage, "Q4 FY22 revenues grew 10% y/y and q/q to Rs3.1bn, on strong demand in domestic M&HCVs, while high steel prices squeezed the gross margin 137bps q/q to 54.1%. Production was 18,000 tons (FY22 61,000 tons). Domestic M&HCVs have consistently grown monthly and are expected to improve further in subsequent quarters on revived economic activity, led by construction, cement and allied sectors. In exports, semiconductor shortages continue to curb volumes in the US while geopolitical tensions have curtailed sentiment in Europe. In EVs, the company is developing products specifically to export markets for CVs and expects production to commence by H2 FY23. Also, a new 6,300-ton press line is expected to be commissioned in FY23, boosting capacity. Accordingly, we expect 18% growth in FY23 and 20% in FY24."

Margins To Expand In Next Two Financial Years

"The Q4 FY22 EBITDA margin contracted 244bps q/q, to 17% as steel prices continued upward last quarter. Higher freight expenses too shaved margins, said management. It has a pass-through with a quarter's lag and has already recouped most RM costs from customers. With expected volume growth in M&HCVs, we expect margins to expand to 19% in FY23 and FY24," the brokerage has said.

Buy for a target price of Rs 1,021

"We continue to expect strong growth in domestic M&HCVs on revived economic activity and high-fleet utilisation. We expect a 19% revenue CAGR over FY22-24; and 17% earnings growth, leading to an EPS of Rs 64. We maintain Buy, at a revised TP of Rs.1,021 (16x FY24e)," the brokerage has said in the report.

About The Company - MM Forgings Ltd

M M Forgings Ltd is a Metal & Mining company engaged in the business of manufacturing Steel Forgings in raw, semi-machined and fully machined stages in various grades of Carbon, Alloy, Micro-Alloy and Stainless Steels. Currently, the company has 10 Plants spread across Tamil Nadu, Uttarakhand and Uttar Pradesh with more than 40000 teams strength.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the author, and the 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 decisions.