Ramkr­ishna Forg­ings Ltd

(BSE Code: 532527) (CMP: Rs.562.45) (FV: Rs.10) (TGT: Rs.675+)

Money Times - - Stock Watch - By Amit Ku­mar Gupta

In­cor­po­rated in 1981, Kolkata-based Ramkr­ishna Forg­ings Ltd (RFL) man­u­fac­tures die forg­ings of car­bon and al­loy steel, mi­cro al­loy steel and stain­less steel. It of­fers crown wheels/ ring gears, I-beams, crankshafts, con­nect­ing rods,

knuck­les, cen­ter wedges, steer­ing and tie rod arms, stub axles, brake flanges, wheel hubs, yokes, front en­gine mount­ing arms, tooth prod­ucts, ham­mer bars, bear­ing caps, coun­ter­weights, ring gear car­ri­ers, pin­ions, front hubs, shafts, cou­pling flanges, gears, clutch col­lars, etc. It also pro­vides screw cou­plings, bol­ster sus­pen­sions, side frame keys and draw gear as­sem­blies. Its prod­ucts find ap­pli­ca­tion in var­i­ous in­dus­tries in­clud­ing au­to­mo­tive, earth mov­ing and min­ing, farm equip­ment, steel plants, rail­ways, gen­eral en­gi­neer­ing, bear­ing, oil and gas as well as OEMs (orig­i­nal equip­ment man­u­fac­tur­ers).

With growth com­ing from North Amer­ica and Mex­ico, we ex­pect RFL’s ex­port busi­ness to grow fur­ther. Ex­ports to Eu­rope are ex­pected to kick in from Q4FY19. Higher ex­ports will sup­ple­ment higher ma­chin­ing ca­pac­ity util­i­sa­tion, driven by de­mand from cus­tomers in Eu­rope and North Amer­ica. We ex­pect rev­enue to grow at 14% CAGR over FY1820, pri­mar­ily driven by a 32% ex­port CAGR to Rs.7250 mil­lion in FY20, up from Rs.4120 mil­lion in FY18. We ex­pect EBIDTA to grow at 17% CAGR over FY18-20. Also, the greater pro­por­tion of ex­ports will en­sure bet­ter work­ing cap­i­tal (debtor days in Eu­rope are 60-70 v/s 162 for North Amer­ica). Con­tin­u­ing ex­port trac­tion in FY19 and FY20, a shift in the geo­graphic mix to Euro­pean mar­kets from higher press-lines and di­ver­si­fi­ca­tion to light com­mer­cial ve­hi­cles (LCVs) and pas­sen­ger ve­hi­cles au­gur well for RFL’s long-term growth and mar­gin ex­pan­sion.

We be­lieve that its do­mes­tic growth will be driven by mar­ket-share gains and ad­di­tion of new cus­tomers. The man­age­ment plans to in­cur capex of Rs.4840 mil­lion over the next two years to­wards LCVs, pas­sen­ger cars, the Rail­ways and forg­ing parts for bear­ings. We ex­pect oper­a­tions to go com­mer­cial from Septem­ber 2020 and be­lieve that this is a pos­i­tive move.

Tech­ni­cal Out­look: The stock looks good on the daily chart for medium-term in­vest­ment. It has formed a down­ward chan­nel pat­tern and trades be­low im­por­tant mov­ing av­er­ages like the 200 DMA level on the daily chart. Start ac­cu­mu­lat­ing at this level of Rs.562.45 and on dips to Rs.535 for medium-to-long term in­vest­ment and a pos­si­ble price tar­get of Rs.675+ in the next 12 months.

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