Stock To Buy: Company Announces 1:2 Bonus Share, Strong Double-Digit Growth: HDFC Securities
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Stock To Buy: Target Price
The Current Market Price (CMP) of Shivalik Bimetal Controls Ltd. (SBCL) is Rs. 599. HDFC Securities has estimated a Target Price for the stock at Rs. 715. This stock has the potential to give a 19.36% return, in the upcoming 1 year. It is a small-cap stock with a market capitalization of around Rs. 2,475 crore.
| Stock Outlook | |
|---|---|
| Current Market Price (CMP) | Rs. 599 |
| Target Price | Rs. 715 |
| Potential 1 year return | 19.36% |
| 52 week high share price | Rs. 649 |
| 52 week low share price | Rs. 190.80 |
Financial Result
SBCL reported 58% YoY growth in its topline which stood at Rs. 111 Cr in Q1FY23. Revenue growth was on account of robust volume growth over last year and higher realization on consolidated basis. Its EBITDA margins for Q1FY23 stood at 21.6% (+139 bps/ 39 bps YoY/QoQ) while EBITDA increased by 60% YoY to Rs. 25 Cr led by higher operating leverage and increased sales volume. APAT stood at Rs. 22 Cr. Other Income includes fair valuation gains aggregating to Rs. 512.44 Lakhs on existing stake in SEPPL & SBEPL.
Sectoral growth
All business segments witnessed secular solid growth in double digits: thermostatic bimetal/trimetal strips grew by 44.08% YoY to reach Rs. 49.06 Cr and grew sequentially by 9.76% QoQ; while shunt resistors grew by 34.24% YoY to reach Rs. 48.60 Cr and grew sequentially by 8.78% QoQ. In Q1FY23, revenues from thermostatic bimetal/trimetal strips compromised 49.09% of the total revenue, while shunt resistors accounted for 48.63% of overall revenues.
Based on the encouraging demand trajectory SBCL has initiated further Capex projects. This is mostly balancing and finishing equipment to support capacity/quality enhancement.
Stock Advantages: HDFC Securities
According to HDFC Securities, “Outlook for the SBCL’s business in the medium to long-term remains positive given the diverse usage of its products. Government’s conducive policies towards the growth of Smart Metering, EVs and Switchgear market is a major promising sign. While healthy growth in foreseen in all the sectors catered to by SBCL, (switchgear, metering, power electronics and automotive) the most promising market for the company will be the EV sector in the medium term as the company’s products find many applications not only in the Electric Vehicle itself, but also in the charging stations given the charging stations will require both Switchgear as well as Current Sense Resistors.”
Stock value
“We think the base case fair value of the stock is Rs. 665 (32x FY24E EPS) and the bull case fair value of is Rs. 715 (34.5x FY24E EPS). Investors can buy the in-stock Rs. 595-605 band (29x FY24E EPS) and add more on dips in Rs. 535-545 band (26x FY24E EPS) band,” the brokerage firm said.
Being one of the few manufacturers of bimetal parts and shunt resistors in India, SBCL faces limited competition. It is a single vendor to many OEMS since last 30+ years. The company caters to a broad spectrum of applications, including switch-gears, energy meters, and electrical applications, and automotive and electronic devices.
