Buy Agarwal Industrial Corporation; target of Rs 705: Hem Securities

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Hem Securities report on Agarwal Industrial Corporation

Agarwal Industrial Corporation Ltd. (AICL), functions as an infrastructure ancillary for the transport & logistics segments because of it’s powerful logistical assets & infrastructure. AICL own 6 large marine vessels having total capacity of 38,000 MT with 650+ Fleet Size consisting of 350+ Bitumen Tankers and 300+ LPG Tankers. Company own 7 bulk storage terminals facilities with a total storage capacity of 30,000 MT having direct access to shipping networks & 6 state-of-the-art manufacturing facilities. In FY22, AICL has posted solid set of numbers where company has shown whopping 77% rise in topline while operating profit grew by 48% as compare to FY21 & bottomline has jumped by healthy 57%. As historically Q4 & first two months of Q1 being the peak revenue generators for company, we expect AICL to grow at healthy rate going ahead. Company being market leader in Bitumen with decent 28% market share will be one of the key beneficiary of increasing government focus on infrastructure spending in creating more roads & highways.

Outlook

Hence we are initiating coverage on the stock. Currently stock is trading at 10x of FY23E eps while it is trading reasonably at 8x of FY24E eps. Therefore, we initiate “BUY” on stock with price target of Rs 705/share (13x of FY23E eps & 11x of FY24E eps) depicting healthy upside of 32% from current level.

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