The shares of the automobile components manufacturer gained up to 1 percent after Sharekhan, a well-known brokerage recommended a ‘Buy’ rating.
With a market capitalization of Rs 11,372.63 crore, the shares of Ramkrishna Forgings Ltd were trading at Rs 629.55 per share, increasing around 0.51 percent as compared to the previous closing price of Rs 626.35 apiece.
Looking into Ramkrishna Forgings Ltd’s performance, revenue increased by 36 percent from Rs 777 crore in Q3 FY23 to Rs 1,058 crore in Q3 FY24. During the same period, net profit increased by 43 percent, from Rs 61 crore to Rs 87 crore.
Sharekhan, one of the well-known brokerages in India, gave a ‘Buy’ call on the automobile stock with a target price of Rs 888 apiece, indicating a potential upside of 40 percent from Thursday’s price of Rs 629.55 per share.
Here’s the rationale for the potential upside target:
● RKFL has recommended combining its freshly acquired firms, JMT and MAPL, due to significant synergies and cost reductions. After the merger of JMT and MAPL, the merged entity’s casting capacity will be 33,600 MTPA, up from JMT’s current capacity of 12,000 MTPA.
● Furthermore, The merger scheme aims for seamless integration, resource optimization, and compliance, enhancing business performance. RKFL projects a turnover of Rs 600-675 crore by FY26 for MAPL and JMT combined, compared to Rs 175-225 crore expected in FY24.
● RKFL plans to invest Rs. 80 crore to install an 8000T forging press line, starting production by Dec 24, and Rs. 125 crore for a cold-forging press line, operational by Q1FY25. Targeting a capacity of 308,400T by FY25, up from 210,900T.
● RKFL, the second-largest forging player in India, has shown strong growth over the last 5 years. With an increased geographical presence, a higher customer base, and reduced customer dependency, it has diversified its revenue streams. The export mix has improved, with a rising contribution from Europe.
● RKFL remains optimistic amidst challenges, expecting sustained growth driven by new order wins and capacity utilization. It anticipates a 15-20% volume growth, focusing on long-term sustainability. Benefiting from global trends, it targets significant turnover
increases by FY26.
Ramkrishna Forgings Limited engages in two business segments: forging components and others. The Forging Components section produces and sells forged automobile components, as well as sanitization and freight services including tours and travel.
Written by:- Abhishek Singh
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