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Reliance Securities
Ramkrishna Forgings (Buy)
Target: ₹1,650
CMP: ₹1,039
Ramkrishna Forgings (RMKF) delivered a strong performance in Q3-FY22 beating our estimates across the parameters. Revenue grew by 51 per cent y-o-y/5 per cent q-o-q to ₹610 crore (vs. our estimate of ₹550 crore), on the back of a volume increase of 16 per cent y-o-y/4 per cent q-o-q to 29,520 tonne, owing to healthy export volumes.
EBITDA increased by 79 per cent y-o-y/1 per cent q-o-q to ₹140 crore (surpassing our estimate by 19.3 per cent), while EBITDA margin expanded by 370bps y-o-y (down 91bps q-o-q) to 23.1 per cent (vs. our estimate of 21.3 per cent) on better operating leverage and pricing power.
Better product-mix with higher exports contribution led to better operating leverage, which benefited RMKF’s margin, despite higher input cost. Its PAT grew 171 per cent y-o-y (down 10 per cent q-o-q) to ₹45.10 crore, 2 per cent higher than our estimates, due to higher than estimated EBITDA margins.
We expect a strong CV upcycle over the next 1-2 years, domestically as well as globally. Moreover, its new margin territory coupled with healthy order wins across segments and geographies will support its rerating. Thus, we reiterate our Buy recommendation on the stock, with a revised Target Price of ₹1,650 (vs ₹ 1,700 earlier).
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