Hilton Metal Forging Ltd: A potential multibagger
(BSE Code: 532847) (CMP: Rs.50.75) (FV: Rs.10)
Hilton Metal Forging Ltd (HMFL) was incorporated in 1997 with a vision to export Stainless Steel Forged Flanges and Stub Ends to USA and European countries. Today, it is a technology leader in the forging industry primarily engaged in the manufacture of Steel Forgings and Flanges and Forged Fittings for both the domestic and overseas markets. It provides the highest quality products and services as a one-stop solution to cater to all forging needs. HMFL is currently headed by Mr. YuvrajMalhotra, Chairman and Managing Director. Its state-of-the-art integrated plant is situated at Palghar in Maharashtra with manufacturing facilities for engineered parts, stainless steel flanges, high pressure flanges, crank shaft, body bonnets, hydraulic fittings, forged components, Christmas tree components, top deck cover, stub ends, threaded flanges, blind flanges, weld neck flanges and socket welded flanges. Its Forged components are widely used in automotive and truck, agricultural machinery and equipment, valves, firrings, oil field applications, hand tools and hardware, off-highway equipments/ railroads, general industrial equipments, ordnance/ shipbuilding, aerospace, etc.
Exports account for more than half of HMFL’s turnover. The Company has a major thrust on exports and has taken several initiatives to boost exports. It intends to explore the possibility of stocking and selling in USA, especially in the oil and gas sector.
HMFL’s strategy for new business development is to identify new programmes for existing and new customers for early engagement as well as horizontally deploy the existing products to new markets or customers. It has also started to explore the supply potential of forging parts to Railways, turnkey projects, earthmoving equipment manufacturers and the defence sector.
In Q4FY17, HMFL posted 132% higher revenue of Rs.36 crore as against Rs.16 crore in Q4FY16. It posted PAT of Rs.1.4 crore as against a loss of Rs.0.5 crore in Q4FY16 thus executing a turnaround. It posted an EPS of Rs.1.1 in Q4FY17.
At the CMP of Rs.50.75, the stock trades at a P/E of 46x on Q4FY17 EPS of Rs.1.1. The stock is available at a discount if we compare it to the industry P/E of 54x, S&P BSE Small-Cap P/E of 75.8x, Nifty Small-Cap 250 P/E of 110.5x and Nifty Mid-Small Cap 400 P/E of 52.5x. The Company’s top-line and EBITDA have both improved significantly on both quarterly and annual basis. Also, considering the demand drivers, we recommend this stock with a long-term price target of Rs.70-80. The stock’s 52-week high/low is Rs.54.55/14.50.