Ramkrishna Forgings Gets 'Buy' As UBS Initiates Coverage, Sees 50% Upside

Ramkrishna Forging Ltd. got a 'buy' rating as UBS Global Research initiated coverage on the stock. The brokerage sees an upside of 50% on the stock as it sees a long growth runway and capacity expansion.

It set a target price of Rs 1,500 per share, against the previous close of Rs 1,028 apiece. This is the highest target set by any analyst, as per Bloomberg data.

The auto components and equipment manufacturer's revenue grew at 10 times over the past 10 years, compared to domestic peers' two to five times growth, UBS said. "Its global market share remains in the low single digits, implying a long growth runway."

The previous growth drivers remain relevant as the firm transitions from a pure forging company to a total assembly solution provider, and expands the product portfolio, UBS said. "These should help RKFL gain market share."

Upcoming capacity expansion, client additions, key order wins and recent acquisitions provide earnings visibility, UBS said.

The equipment supplier has consistently increased the share of product per vehicle and share of machined, higher tonnage products, the brokerage said. "This strategy has helped RKFL to increase penetration of clients/products and should drive market share."

Ramkrishna Forgings' share price rose as much as 3.49% during the day to Rs 1,064 apiece on the NSE. It pared gains to trade 1.99% higher at Rs 1,048.6 apiece, compared to a 0.27% decline in the benchmark Nifty 50 as of 10:12 a.m.

The stock has risen 59% during the last 12 months and has advanced by 44% on a year-to-date basis. Total traded volume so far in the day stood at 7.9 times its 30-day average. The relative strength index was at 63.

Five out of the eight analysts tracking the company have a 'buy' rating on the stock, and three have a 'sell', according to Bloomberg data. The average of 12-month analysts' price targets implies a potential upside of 1.1%.