2 Small & Midcap Stocks To Buy With Potential To Surge

Broking firm Anand Rathi has a buy call on the stocks of Ramkrishna Forgings and M&M Financials, where the brokerage sees a good upside. Please note, these are not our stock recommendations and are from those of the brokerage firm Anand Rathi.

Buy the stock of M&M Financials for a target price of Rs 328

Anand Rathi has set a price target of Rs 328 on the stock of M&M Financial Services as against the current market price of Rs 266.80. According to the brokerage the asset quality has improved, and the stronger underwriting is likely to bear fruit.

"GS3 was below 6%, well below the guidance. Concerted efforts regarding collection and the change in underwriting standards should keep asset quality steady as we build in a more predictable credit cost of 1.6% over FY23-25. Our 12-month target price of Rs328 is based on the two-stage DDM model. This implies 1.9x P/BV and ~1.7x P/BV multiples on FY24e and FY25e," the brokerage has said.

Buy the stock of Ramkrishna Forgings for Rs 380 price target

Anand Rathi has set a price target of Rs 380 on the stock of Ramkrishna Forgings. "We expect 12%/25% EBITDA/PAT CAGRs over FY23-25. We resume coverage with a Buy at a revised 12-mth target price of Rs 380 (8.5x EV/EBITDA on FY25e)," the brokerage has said.

According to Anand Rathi the key risks are less-than-expected growth in CVs, delay in order execution and adverse commodity/forex movements.

Robust performance on a strong order book. Q4 revenues grew 22% y/y to Rs8.4bn, in line with our estimates, aided by strong performance, 17% domestic, 29% export. Automotive revenue grew 20%, non-auto 34%. The EBITDA margin expanded 40bps to 22.5%, on lower freight costs. Interest cost shot up 22% to Rs318m led by the higher interest rate and LC bank charges. Accordingly, PBT grew 29% to Rs1.02bn. Sequentially, the gross margin contracted due to the adverse mix (fewer exports and non-auto).

"The company continued to win orders across segments, Rs7.7bn in FY23. Also it recently won a large order to supply forged rail wheels to the Indian Railways with Rs125bn potential revenue over 20 years, to commence by FY27. The ACIL and JMT acquisitions would expand operations in machining and oil & gas, respectively over the medium term. Further investment in Tsuyo would help tap EV-specific component opportunities," Anand Rathi has said in its latest report.

Disclaimer

The stocks are picked from the brokerage report of Anand Rathi. This is not a recommendation from the author or from Greynium Information Technologies Pvt Ltd. Neither the author, nor the Brokerage firm nor Greynium Information Technologies should be held responsible for losses based on the article.