Buy Mishra Dhatu Nigam, target price Rs 260: ICICI Direct

ICICI Direct has given a buy rating to Mishra Dhatu Nigam with a 12-month target price of Rs 260. The share price moved up by 0.85 per cent from its previous close of Rs 212.50. The stock’s last traded price is Rs 214.30.

After registering a flattish trend in FY17, FY18, Mishra Dhatu Nigam’s order book witnessed a remarkable increase in FY19 and 9MFY20, auguring well for the company. The order book was at Rs 651 crore end of FY17 and Rs 569 crore at the end of FY18. However, since March 2018, on the back of receipt of healthy orders from the space segment, the order book increased to Rs 1,660 crore at the end of FY19 and to Rs 1,687 crore as of April 2020. Currently, it is 2.4 times FY20 topline, thereby providing healthy revenue visibility. The company’s FY20 topline was at Rs 713 crore.

Investment Rational

Mishra Dhatu Nigam’s Q4FY20 performance was impacted by Covid-19 related concerns. Even in FY21, due to Covid-19, there was a disruption in production activity for 45 days. Subsequently, normal production activities have resumed from May 20, 2020. Dispatch of finished materials has already started in May 2020. Backed by a strong order book position, the brokerage expects the company to report healthy performance, going forward. ICICI Direct values the stock at 22 times FY22E EPS with a target price of Rs 260.



Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 203.63 crore. The company reported net profit after tax of Rs 40.39 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 74 per cent stake in the company as of March 31, 2020 while FIIs held 0.72 per cent, DIIs 18.74 per cent and public and others 6.51 per cent.