This Midcap Capital Goods Stock Gave More Than 200% Return In 3 & 5 Years, "Buy" Says ICICI Direct

ICICI Direct recommended investors to buy the stock of Grindwell Norton (GNL) for a target price of Rs 2,340/share. Considering the given target price, if you buy the stock at the current market price, it is likely to fetch a return up to 19%. This is a Capital Goods sector stock engaged in the business of manufacturing Abrasives, Ceramics & Plastics and providing IT Services. It is a midcap stock having a market capitalisation of Rs 21,874.95 crore. Check below to know more:

GNL's stock outlook & returns

The share price of GNL on NSE last traded at Rs 1,975.70 apiece, up 2.06%. Its 52 week high is Rs 2,328.35 apiece and 52 week low is Rs 1,451 apiece, respectively. It declined 2.41% in 1 week, and 1.54% in 3 months, respectively. However, it has given 24.17% positive return in 1 year, 213.85% in 3 years, and 291.42% in 5 years, respectively.

 

Q3FY23 Results

GNL reported a decent set of Q3FY23 numbers. Revenues came in at Rs 603.9 crore, up 20.3% YoY, primarily aided by a strong performance in the ceramics & plastic segment. EBITDA came in at Rs 119 crore, up 32.6% YoY with margins at 19.7% while gross margins marginally expanded by 20 bps to 54.9% YoY. Consequently, PAT grew 15% YoY to Rs 80 crore.

 

Buy for a Target Price of Rs 2,340/share, says ICICI Direct

According to ICICI Direct, Going forward, accelerated growth in performance plastics & ceramics and exports is expected to drive long term incremental growth. "We remain long term positive and maintain our BUY rating on the stock. We value GNL at Rs 2340 i.e. 50x P/E on FY25E EPS," the brokerage has said.

 

Key triggers for future price performance

• Ambition to maintain market share in abrasives and increase market share in ceramic & plastics with gradual penetration of new value added products.
• High margin value added products and solutions oriented approach to drive margin expansion (from ~16.7% in FY20 to 21.8% in FY25E).
• We expect revenue, EBITDA to grow at a CAGR of 15.9%, 19.3%, respectively, over FY22-25E.
• Net debt free b/s, double-digit return ratios and strong cash generation

About the stock

Grindwell Norton (GNL) is the market leader in the India abrasive market with ~26% market share. The segments include abrasives (contributing ~57%), ceramics & plastics (33%) and IT services & others (10%). GNL has witnessed strong and positive free cash flows consistently over more than a decade irrespective of the macro environment. It has consistently operated with high (>16%) margins and return ratios.

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 consult with certified experts before making any investment decision.