The small-cap dividend-paying stock could hit a 52-week high after the third quarter. Purchase?

Announcing its Q3FY23 results on Friday, the company informed the stock exchanges saying “The Board of Directors declares Third Interim Dividend of Rs. 0.50 per equity share. 2 each for the financial year 2022-23. The said dividend shall be paid within 30 days from the date of declaration. The same is subject to TDS. For the purpose of payment of Third Interim Dividend for the financial year 2022-23 to be paid to the eligible shareholders on Tuesday, 31st January, 2023 has been set as the record date for the

The firm earned a consolidated net profit of Rs. 61.04 crore in Q3FY23 as against Rs. 45.35 crore over the same period last year, representing a growth of 35%. Compared to Q3FY22 quarter net sales 601.32 crore, the firm registered a net sale of Rs. 777.48 crore for the quarter ending December 2022, marking a YoY growth of 29%. in comparison 141.18 Cr from what was recorded in the same quarter a year ago, the firm reported EBITDA 172.99 crore in Q3FY23, showing a YoY growth of 23%.

Ramakrishna Forgings in its earnings report said that “During the quarter, we have entered into a share purchase agreement to acquire 51% voting rights of TSUYO Manufacturing Private Limited, a start-up company engaged in powertrain solutions for electric vehicles. The resolution plan for acquisition of JMT Auto, one of the largest auto component manufacturers in the eastern region having significant expertise in the auto sector, has been approved by the Committee of Creditors (CoC) as required by the Principal Bench of the National Company Law Tribunal, New Delhi. subject to approval.”

Commenting on the results, Mr. Naresh Jalan, Managing Director, Ramakrishna Forgings Ltd. said: “Our diversified and robust business model has driven sustained growth momentum, primarily driven by high customer demand as well as our efforts to enhance product offering. Driven by strategic decisions. These efforts have enabled us to achieve 24% year-on-year operating revenue growth. Our global geographic reach has helped us win new orders and further strengthen the order book. In the first nine months of FY23, we won contracts worth Rs. 77,470 lakhs from 8 contracts spread across different geographies including North America and Europe. As on December 31, 2022, we have reduced our gross debt by 23% and it currently stands at Rs. 1,28,689 lakhs. We will continue to focus on debt reduction with a target of becoming net debt free by FY25.”

“The commercial vehicle segment has witnessed a steady growth post the festive season, owing to higher fleet utilization as a result of increased economic and infrastructure activity. The momentum is expected to continue, and the overall commercial vehicle market is projected to remain strong. Furthermore, with the acquisition of Suyo and JMT Auto, we plan to expand and diversify our company, which will result in increased scale and market reach. Our efforts are focused on a customer-centric approach to offer advanced and value-added products across the globe and maintain our strong market share.”

After Q3 FY23 earnings, research analysts at Sharekhan said, “RKFL 400-450 cr and likely revenue over FY23E and FY24E guided 5,000 crore at peak capacity utilization and target to maintain EBITDA margin at 22%. RKFL as well is striving to increase the non-auto revenue mix to 30% (currently 19%) and 3-3.5% (currently 2%) revenue contribution from the EV segment. The management is bullish on its export business and is guided for 15-20% growth in export revenue in FY24. With strong plans for organic growth driven by healthy response from export markets, RKFL is strategically building on inorganic growth opportunities. RKFL has acquired 51% stake in TSUYO to expand its EV product portfolio and its bid to spin off JMT Auto has been accepted. We expect RKFL to capture international market share given its ability to provide an attractive value proposition to its customers. The stock is available at attractive valuation multiples of 9.7x on its FY2025E P/E and EV/EBITDA of 5.3x. We reiterate our buy rating on the stock with a revised price target (PT) of Rs. 329.”

Research analysts at Anand Rathi said, “Demand at RK Forgings remained strong in Q2. The growth was driven by strong volumes. Despite fears of a slowdown, the management expects domestic growth and exports to outperform the industry in the near term.” The order book is healthy with growth in the quarter. We expect strong growth in commercial vehicles and hence, maintain our buy at a revised TP of Rs 309 (13x FY25e).”

Shares of Ramakrishna Forgings Limited on NSE on Friday 266.10 each level, down 4.38% from previous close 278.30. The stock recorded a total volume of 1,666,289 shares as compared to 20-day average volume of 572,510 shares. On 19 January 2023, the stock hit a 52-week high of Rs. 285.00 and a 52-week low of Rs. 146.00. (20-June-2022). If the stock reaches the target price specified by the above brokerage companies, it will record a 1-year high.

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