Hil­ton Me­tal Forg­ing Ltd: A po­ten­tial multi­bag­ger

(BSE Code: 532847) (CMP: Rs.50.75) (FV: Rs.10)

Money Times - - Stock Analysis Stock Scan - By Rahul Sharma

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.

Con­clu­sion:

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