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| Summary of Contents STOCK UPDATE Ratnamani Metals and Tubes
Recommendation: Hold
Price target: Rs270
Current market price: Rs256 Downgrade to Hold on limited near-term upside, maintain positive stance Key points - Ratnamani Metals and Tubes has appreciated by 56% since we upgraded it to a "Buy" rating at Rs163 on March 7, 2014. This limits the upside to our revised price target of Rs270.
- Despite the sharp appreciation in the stock price and the limited upside in the near term we are confident about the company's structural growth story due to an improvement in the demand environment in the replacement market and a surge in new investments in the oil & gas sector (the key user industry). The recent announcement of a large order worth Rs400 crore (which takes the order book to approximately Rs1,200 crore; close to 1x its annual revenues) reaffirms our faith in the company.
- Considering the limited upside from the current level, we are downgrading the stock to "Hold" rating with a price target of Rs270.
VIEWPOINT
Suprajit Engineering
Current market price: Rs73
View: Positive All set to deliver an impressive performance in Q4 Key points - Suprajit Engineering, India's largest automobile cable manufacturer, is set to grow at an extremely healthy compounded annual growth rate of more than 30% over FY2014-16. It has already proved its mettle by reporting a high double-digit growth in revenues and earnings during FY2012-14 in spite of a tough business environment for the auto ancillary companies. In addition to strong traction in exports, the company would gain from an economic revival-driven better growth in the automobile industry domestically.
- After reporting strong Q3FY2014 results, the company is expected to announce a superlative performance in Q4FY2014 also with the revenues and earnings growing by 28% and 38% respectively. It is gaining market share with India's fastest growing two-wheeler manufacturer, ie Honda Motorcycle & Scooter India. Additionally, increasing after-market sales would drive its growth in the near future.
- The recent rally in the stock price already factors in the near-term recovery. However, we believe the stock offers scope for 20-25% (Rs92-95 based on 12x FY2016 estimates) upside from the current level driven by strong quarterly results and growing institutional interest in the stock. Thus, it is not only a play on strong Q4FY2014 results but also an attractive investment pick in the auto ancillary sector.
| | | Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article. | |
| Regards,
The Sharekhan Research Team |
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