Sharekhan Says Buy This Castings & Forgings Stock, Hit 52-Week High, Robust Order Book

Management of Alicon has witnessed a demand uptrend across domestic markets, driven by increased spending and consumption, a shift towards new high-tech vehicles, and personal mobility preference, among other factors Top brokerage firm Sharekhan has given a buy rating to the stock of Alicon Castalloy Limited (Alicon). As of FY22-end, the company's order book (since FY19) stood at a robust Rs. 3,000 crores. Alicon is a pioneer in low-pressure die casting (LPDC) and gravity die-casting (GDC).

Stock To Buy: Target Price

The Current Market Price (CMP) of Alicon is around Rs. 988. Sharekhan has estimated a Target Price for the stock at Rs. 1159. This stock has the potential to give a 17.30% return, in the upcoming 12 months. This small-cap stock has a market capitalization of Rs. 1,753 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 988
97Target Price	Rs. 1159
Potential Upside	17.30%
52-week high share price	Rs. 1,112.90
52-week low share price	Rs. 585.05

Q2FY23 financials above expectations

Alicon Castalloy Limited's (Alicon's) Q2FY23 results were slightly above expectations, with revenue, EBITDA and PAT beating estimates by 1.7%, 3% and 12%, respectively. The company's performance in Q2 was strong, with EBITDA and PAT growing by 14.7% q-o-q and 42.5% q-o-q respectively. EBITDA margin expanded 40bps q-o-q to 11.3% in Q2FY23, led by improved product mix, cost reductions and operating leverage benefits. The company is also focusing on value-added products and international markets.

Stock Valuation according to Sharekhan

According to Sharekhan, "Overall, the company's long-term target is to bring wallet share in the EV business to 12% in FY23E and 36% of overall revenue by FY26. We believe the company continues to gain new businesses because of its strong research and development (R&D) capabilities, its expertise in aluminium alloy castings, and its long-established relationship with leading OEMs. We reiterate our Buy recommendation on the stock with a 12-month price target of Rs. 1,159. We maintain our positive view on Alicon Castalloy Limited's growth prospects, led by a robust order book, multi-year order wins, increased share of high-margin machined components, and higher share of the e-mobility business."

Alicon: beneficiary of improved business outlook

The execution of Alicon's multi-year order wins is expected to contribute significantly from FY2022, which provides strong growth visibility going forward. Alicon expects new orders to add Rs. 600 crore-700 crores yearly and gradually ramp up in the subsequent years. Alicon expects the share of the four-wheeler business segment to increase from 36% currently to 51% over the next four to five years. Besides its focus on light-weighting technology and EV segment components, the company has been strengthening its export and international business. Earnings are likely to report a robust 118% CAGR during FY2022-FY2024E, led by a 27% revenue CAGR.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. 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.