Stock To Buy: Small Cap Engineering Stock Trading Near 52-Week Low, Sharekhan Sees 50% Upside

Sharekhan has a "Buy" on Greaves Cotton Ltd., a small cap Engineering sector stock. The brokerage sees a potential upside of upto 50% with the estimated target price of Rs 183 apiece to the stock. The stock has recently hit the 52 week low and currently trading near its lows. This stock has a market capitalisation of Rs 2,847.06 crore. Check below to know more:

Stock's Current Market Price, Returns, 52-Week Low/High

The stock gained 1.74% and closed at Rs 122.95 apiece. The stock recorded its 52-week high last year on 11 April at Rs 210.80 apiece, whereas, it hits 52-week low this week on 14 March 2023 at Rs 118.15 apiece.

It has fallen 2.54% in the past 1 week. In the past 1 month, it has fallen 7.38% and in the past 3 months, it has fallen 2.58%, respectively. In 1 year, it has fallen 24.59%. Whereas, it gained 23.59% in 3 years and 4.64% in 5 years, respectively.

Valuation - Maintain Buy rating with an unchanged PT of Rs. 183

Sharekhan said, "After visiting Greaves' Ranipet plant and management interactions, we believe that Greaves is strategically building up new business (EVs & retail) for growth and continue to strengthen its legacy business via organic as well as organic route. While subdued performance in EV business has impacted its performance in Q3FY23 due to change in regulatory norms we understand that EV business would revive from Q4FY23 onwards."

It added, "Further, the management is looking for a structural and sustainable growth in the EV business and indicated that it has been equipped to launch products in entry level to premium segment but gradually introducing products according to relevant demand scenario. Despite a muted Q3FY23, operating losses in the EV business came down on a rise in volumes and better product mix. This makes us to believe that operating performance would improve further on ramping up of volumes and operating leverage. Along with the EV business, a consolidation of high-margin Excel business would drive its overall profitability and customer profile in engineering division."

It further added, "We expect the financial performance of the e-mobility business to strengthen going forward, driven by increasing contribution of high-speed e-2Ws, increasing retail penetration, and new launches. We believe that GCL's diversification strategy is reaping the benefit as it has been broadening the growth prospects in both B2B and B2C space. The stock is trading at a P/E multiple of 15.7xand EV/EBITDA multiple of 6.5x its FY2025E estimates. We maintain our Buy rating on the stock with an unchanged PT of Rs 183."

Key Risks

Commenting on the key risks, the brokerage said, "The company's performance can be impacted adversely if commodity prices start to rise again in the near term. With larger players getting aggressive in the EV space, competition is expected to intensify, which may affect the company's profitability in the medium term."

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.