Anand Rathi, a reputed brokerage firm has recommended buying the stocks of ZFCV India, in a recent report. The company launched a high-margin product, automatic slack-adjusters, indigenously developed, which is expected to boost the company's profitability.
Target Price, CMP, and company performance
The Current Market Price (CMP) of ZFCV India is Rs. 8,015. Anand Rathi has estimated a Target Price for the stock at Rs. 9,227. Stock is anticipated to give a 15.12% return, in 1 year. ZFCV India is a mid-cap company with a market capitalization of Rs. 15,491 crore.
|Current Market Price (CMP)||Rs. 8,015|
|Target Price||Rs. 9,227|
|1 year return||15.12%|
|52 week high share price||Rs. 8,194.90|
|52 week low share price||Rs. 8,121.65|
ZFCV India's Q4 revenue has increased by 10% YoY, 20% QoQ, to Rs. 7.8bn on high off-take in CVs. Segmentally, OEMs increased by 13% YoY, 32%, and QoQ to Rs. 3.6bn; the aftermarket grew 8% YoY, 16% QoQ, to Rs. 1.01bn and exports were flat YoY, but QoQ grew 8% to Rs. 2.4bn.
According to the report, sequential recovery in its M&HCV volumes and added products were the highlights of the quarter for ZFCV India. Its strong revenue was aided by a good recovery in M&HCV volumes. Anand Rathi is expecting the early adoption of high-end braking system technology by domestic OEMs to augur well for its long-term growth.
Advantages of the Stock: Anand Rathi
Maintaining the buy rating, Anand Rathi said, "In EVs, it won a sizeable order to supply electric compressors for electric buses and is jointly working with OEMs to upgrade their existing braking technology to regenerative braking systems (EBS). In exports, the global semiconductor shortage hurt CV production. The company plans to expand capacity for products such as car-compressor assemblies, automatic slack-adjusters, and spring-brake actuators, on the strong demand expected. The new Oragadam plant for additional export capacity is expected to begin production by Aug'23, said management. Hence, we expect 32% growth in FY23 and 21% in FY24. We expect a 27% revenue CAGR over FY22-24, and earnings of Rs. 3.6bn, leading to an EPS of Rs. 192.2."
However, in Q4 FY22 prices of aluminium for ZFCV rose 55%, of hot-rolled steel 30%, of cold-rolled steel 22% and of copper 19%. The management has talked of recovering the bulk of higher RM prices by passing on costs to customers. Accordingly, the brokerage firm is expecting margins of 12% in FY23 and 14.5% in FY24.
About the company
ZF India is a Pioneer in the manufacturing and supply of Ball and Nut Integral Hydraulic Power & Worm and Roller Mechanical Steering System in India. Its plant is located at Village Vadu Budruk, Taluka- Shirur, 28 km away from Pune, on Pune - Ahmednagar Highway, in the western part of India. Pune is a major automotive hub with OEM like Force Motors, General Motors, Mercedes Benz, Mahindra Trucks & Bus Ltd, TATA Motors, etc. The present installed capacity of the plant is 2,00,000 units of Worm and Roller Mechanical Steering Gears and 3,75,000 units of Ball and Nut Integral Hydraulic Power Steering Gears.
The company produces Ball and Nut Integral Hydraulic Power Steering Gears for Heavy Commercial vehicles, Integral Hydraulic Power Steering Gears for Medium and Light Commercial Vehicles, Power steering gears for SUV and off-road vehicles, Cast Iron Vane Pump, Aluminum Vane Pump, Oil reservoirs, Integrated Oil Tank, Steering columns, etc.
The company's manufacturing equipment are 31 HMC's, 19 VMC's, 18 Turning centers, 50 SPM's, 200 GPM's. State of art Grinding machines with robotic loading unloading etc.
The above stock was picked from the brokerage report of Anand Rathi. 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.