Ramkrishna Forgings Ltd. share price target

RK forgings posted strong domestic volume with 23,112 tons posting growth of 106% driven by better growth in Key clients and market share gains for other suppliers as RK has been able to develop new components from newly commissioned press lines. The company has been fairly successful in ramping-up new press lines with volumes increasing to 11,902ton from 3768ton. These components have better margins than existing components as they are more complex and are less competitive. Domestic CV cycle is expected to continue to grow on account of recovery in key sector like road construction and mining which account bulk of CV consumption. Further due to structural reforms like ban on over loading and possible scarping of old vehicle(15 year old) are shifting industry towards higher tonnage vehicle (more towards 36Ton from 16Ton) which is expected to benefit forgings companies as more axles and drive components are needed....

Ramkrishna Forgings Ltd. (RKFL) reported net sales of INR 3333 mn in 2Q FY18 (114.1% jump over INR 1557 mn YoY) and a PAT of INR 235 mn (loss of INR 50 mn YoY) on the back of pickup in both domestic export volume and improved realizations. EBITDAM has improved by 164.5 bps YoY despite delay in passing of increased RM cost to the clients. RM cost as % of sales increased by 1618 bps. Employee expenses as % of sales declined 564 bps YoY on the back of positive operating leverage. Results are largely in line with our estimates. At CMP of INR 748 the stock is trading at 8.4x its FY19E EBITDA. We recommend...

We maintain BUY with a TP of Rs 913, based on 9x Sept-19E EV/EBIDTA (vs 8x earlier), on the back of its strong earnings growth, better cash flows, and improving return ratios. Ramkrishna Forgings (RMKF) 2QFY18 results came in ahead of estimates, led by higher domestic volumes and improving operational efficiencies. RMKF has gained significant ground in the domestic CV market, by penetrating deeper into OEMs like Ashok Leyland and VECV, apart from being a strong supplier to Tata Motors. The North-American and European heavy truck market continues to be on the upswing. With new export orders to fructify soon, owing to the ease of capacity constraints, we expect share of exports to rise from 25% in FY17 to 36% by FY20E.

RKFL manufactures products for automobile (sales contribution 60-70%) followed by railways (sales contribution 10%), defence, and mining sectors. RKFL has also forayed into agriculture equipments and power sector. It has 5 plants, out of which 1 is in Liluah, West Bengal and 4 are in Jamshedpur,...

We upgrade to BUY with a TP of Rs 742, based on 8x Jun-19E EV/EBIDTAon the back of its strong earnings growth, improved cash flows, and improving return ratios. Ramkrishna Forgings (RMKF) 1QFY18 results came in ahead of estimates, owing to higher volumes and realisations, and better operational performance. 1QFY18 continued RMKFs trend of improving exports as in 4QFY17. In a weak domestic MHCV market, RMKF has shown good growth led by market share gains and had BS-4 components approved by the OEMs unlike its peers. RMKF is at an inflection point as it successfully scales up its heavy press forgings capacity (utilization currently at 50%) and adds new OEMs and products. This, we believe, will lend heft to its medium- to long-term growth trajectory.

Ramkrishna Forgings (RMKF) 4QFY17 EBITDA at Rs 564mn ( 31% YoY) came in above estimates, as revenue grew 28% YoY on better-than-expected domestic volumes ( 21% YoY) and improved net ASPs.

Ramkrishna Forgings (RMKF) 3QFY17 EBITDA at Rs 396mn ( 9% YoY) came in above estimates. Revenues grew by 7% YoY on better-than-expected domestic volumes ( 31% YoY) and a lower drop in net ASPs. EBIDTA improved by 8% YoY led by 30bps margin expansion.

Ramkrishna Forgings (RKFL) 1QFY17 EBITDA at Rs 429mn (-10% YoY) missed estimates by 15% as net sales witnessed 8% YoY decline on weak export volumes and 2% dip in net ASPs. EBITDA margin expanded 20bps QoQ as higher power and fuel costs ( 125bps) was offset by softer commodity prices.

Ramkrishna Forging Limited (RKFL) promoted by Mr Mahabir Jalan in 1981, is currently a leading player in machined forged products, ring rolling, & high press line forging. RKFL is a preferred supplier for OEM's like TATA Motors, Ashok Leyland & VE Commercial and global supplier for companies like Meritor. The Company has presence in automobiles, railways, mining & defense sector & present in domestic and overseas market. With over 34 years RKFL is coming out with products like Front Axle Beam, Crankshaft, Connecting Rods and Knuckles, critical safety item supplier for Screw Coupling, Bolster suspension, Side frame keys and Draw Gear Assembly for Railway Coaches & wagon. RKFL corporate headquarter is...

Ramkrishna Forgings (RKFL) 3QFY16 EBITDA at Rs 364mn (-4% YoY, -22% QoQ) missed est by 17%, led by a weak topline (-7% YoY, -16% QoQ) and 160bps QoQ decline in EBITDAM to 18.3%. Adjusted for inventory write-down (~2% of sales), margins stood at 20.3%. Muted sales is attributable to 21% QoQ decline in export vols and 13% QoQ drop in net ASP.