Auto Ancillary Stocks At Record Highs After Q3, Anand Rathi Says ‘Buy’

“for Ramakrishna ForgingsExport opportunities continue to grow as the company acquires new customers, enters new territories and further increases its order book. It plans to add 56,000 tonnes in the near term, which will mainly cater to the North American and European markets for EVs. Domestic demand remains strong and is expected to continue, said Anand Rathi, a domestic brokerage and research firm.

On the back of an expected higher proportion of exports and machining materials, the brokerage house expects profitability to increase. Accordingly, “We expect margins of 23% in FY24 and 23.5% in FY25. We expect 21% revenue CAGR and 40% earnings growth in FY22-25, leading to 29.6 EPS,” the note said. The brokerage house has retained Buy rating on the auto ancillary stock with a target price of Rs. 385 per share.

Historically, exports have grown at a compound annual growth rate (CAGR) of 30% in FY 2017-22. for the next two years, and Anand Rathi expects 25% CAGR growth in exports, on the back of growth in existing business, winning new orders 3.6 bn in Q3 FY23, and revenue from the new 56,000 tonne capacity to accrue from FY24. In addition, the company is planning to manufacture components such as e-axles, differentials and motor controllers at the new capacity, targeting the electric vehicle (EV) segment.

“For domestic markets, demand remains strong and we expect revenue to grow at a CAGR of 17% over FY2012-24 driven by continued replacement demand for trucks and expected new demand. This bodes well for long-term growth and creates opportunities to improve the share of business with customers. Accordingly, we expect revenue to grow by 20% in FY2024 and 22% in FY25.”

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.