Shares of Ramkrishna Forgings Limited (RMKF) surged 10 per cent to hit an intraday high of Rs 1,233.70 on the Bombay Stock Exchange (BSE) after the company posted its earnings for the quarter ended September 2021. The stock has been gaining for the last four trading sessions and has risen 10 per cent during the same period.
The small-cap stock has delivered more than 250 per cent return to its shareholders in the last 12 months. In the past one year, RMKF share price jumped from Rs 350 to Rs 1,233.70 mark ---- logging around 169.5 per cent return in this period.
With a market capitalisation of Rs 3,864 crore, the share stands higher than 5 day, 10 day, 20 day, 50 day, 100 day, and 200 day moving averages.
The company reported a net profit of Rs 44.06 crore for the July-September quarter, recording a 2938.62 per cent rise on a year-on-year basis. Profit in the year-ago period stood at Rs 1.45 crore. The company's revenue grew 129.67 per cent year-on-year to Rs 578.82 crore.
"We expect a short correction as it is taking Resistance at the nearby Pivot. One can buy at dips (around Rs 1,070) for a target price of Rs 1,500 per share (closing above Rs 1,260)," Mr. Manoj Dalmia, Founder and Director, Proficient Equities Limited told BusinessToday.in.
"We like the long-term structural story of RMKF given its improving capabilities (with the ramp-up in its heavy-tonnage press line along with Machining capacity, RMKF has evolved from manufacturing relatively low-end forgings into complex and heavy components)," said Dolat Capital in a research report.
"Gross debt has peaked out and management is planning to start reducing debt levels. We believe RMKF should benefit from improved free cash flows," it noted.
The brokerage house believes recovery in domestic M&HCV and strong export NA Class 8 trucks, increasing revenue traction from Europe and incremental revenue from LCV business to be key growth drivers in the near to medium term.
"We increase our EPS estimates by 14% for FY23/24E factoring in better margin and value the stock of Rs 1331 (based on 15x FY24E EPS)," it added.
According to MarketsMojo, the company has a low ability to service debt as the company has a high Debt to EBITDA ratio of 3.73 times.
The technical trend has improved from Mildly Bullish on June 29, 2021, and has generated 87.45 per cent return since then. The stock is technically in a Bullish range and multiple factors for the stock are Bullish like MACD, Bollinger Band, KST, DOW and OBV.
It is trading at a premium compared to its average historical valuations and with a ROCE of 5.4, it has a Very Expensive valuation.
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