ICICI Direct has issued a buy call on one of the leading manufacturers of Special Steels, Super Alloys and the only manufacturer of Titanium Alloys in India, for a potential upside of 16 percent.
With a market capitalization of Rs. 9,776.3 crore, the shares of Mishra Dhatu Nigam Limited surged by 2.6 percent on BSE to hit an intraday high at Rs. 539.65 in the trading session of Tuesday, as against its previous closing price of Rs. 526.1.
Brokerage Target
ICICI Direct has issued a ‘buy’ recommendation on Mishra Dhatu Nigam Limited (Midhani), with a target price of Rs. 600 per share, indicating a potential upside of 16 percent from its Tuesday’s closing price of Rs. 521.85.
According to ICICI Direct, Midhani is expected to benefit significantly from improved execution of projects, a strong order pipeline, and the development of new products.
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The brokerage firm estimates that Midhani’s revenue will grow at a CAGR of around 23 percent during FY24-26. Additionally, they expect the company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and Profit After Tax (PAT) to grow at CAGRs of approximately 41 percent and 57 percent respectively, as the company’s profit margins are anticipated to improve in the coming years.
Brokerage Outlook
The brokerage believes that with its state-of-the-art manufacturing facilities, Midhani has strong capabilities in developing and producing that allow it to produce a wide range of special metals and alloys, such as titanium alloys, steel alloys, and superalloys based on nickel, iron, and cobalt. These materials are crucial for industries like defence, aerospace, and energy.
Further, Midhani continues to expand its production capacity, develop new products, and broaden its opportunities in these strategic sectors. This is supported by Midhani’s in-house research and development as well as collaborations with various organizations to leverage technological advancements.
Meanwhile, the order backlog of Mishra Dhatu Nigam stood at Rs. 1,767 crore (around 1.7 times its revenue in the 2023-24 financial year) as of May 2024 end. This gives the company a good outlook for revenue growth over the next 2 years, as it can execute large parts of this order book in short time.
The company expects to get more orders in the future. This is because there is a strong demand for its products, especially in the defence, space, energy, railways, and civil aviation sectors. The defence sector is a key area for the company, considering the significant capex underway in various defence platforms like aircraft, engines, missiles, and tanks.
The company expects to get new orders worth Rs. 1,150 crore in FY25E, compared to Rs. 1,322 crore worth of orders received in FY23-24. The brokerage expects the company’s operational performance to improve significantly in the coming periods, as it improves its supply chain and inventory management.
Financials:
Mishra Dhatu Nigam witnessed an 18 percent year-on-year increase in revenue from operations, climbing from Rs. 332.8 crore in Q4 FY22-23 to Rs. 393.08 crore in Q4 FY23-24. However, the after-tax profit declined by 30.2 percent from Rs. 66.3 crore to Rs. 46.3 crore, during the same period.
Stock Performance:
The stock has delivered positive returns of nearly 71.5 percent over the past one year, and so far in 2024, it has also shown gains of around 25.5 percent.
About the company:
Mishra Dhatu Nigam Limited (MIDHANI) being a strategic Defence Public Sector Undertaking (PSU) is engaged in the manufacturing and supply of superalloys, titanium, special purpose steel and other special metals to Defence and other strategic sectors for Nuclear, aeronautical and space applications.
Written by Shivani Singh
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