Despite GMM Pfaudler falling 15 percent in December on the back of news regarding promoter stake sale, domestic brokerage house Axis Securities sees a sharp rise in the stock in one year.
The brokerage has maintained its ‘buy’ call on the stock with a target price of ₹2,444, indicating an upside of over 60 percent.
Last week, Pfaudler Inc, controlled by DBAG Fund VI, sold 7.8 million shares or 17.32 percent of the company through bulk deals at ₹1,700 per share. DBAG has been a financial investor in the company since 2014. Post sale, DBAG Fund VI owns 14.56 percent of the company.
Meanwhile, the Patel family has entered an arrangement to purchase 0.45 million shares or 1 percent from DBAG Fund VI at ₹1,700 per share, subject to regulatory approvals, through an inter–se promoter transfer.
According to the brokerage, GMM Pfaudler is a play on the manufacturing shift of chemicals/ pharmaceuticals from China/ developed markets to India – a strong theme for the next decade.
Interestingly, a similar theme is playing out in the company’s own operations. In the international companies that GMM Pfaudler acquires, product manufacturing is moved to India, finishing/assembly is done in developed markets, and a top-quality product is delivered to clients at a developed market pricing, it pointed out.
The brokerage further said that it expects the company to grow EPS at a CAGR of 61 percent over FY22-25E.
Stock price trend
The stock has been almost flat in 2022, up over 2 percent during the year. However, the stock has lost over 15 percent just in December on the back of the stake sale news. This comes after a 6 percent rise in November.
In 2022, the stock has been positive in 7 months while giving negative returns in the remaining 5 (considering December so far). It has fallen the most in December followed by February when it shed 12 percent.
Meanwhile, the stock has given its best returns in September, up 16 percent, followed by July, up 10 percent.
Financial performance
In the September quarter, the company's net profit more than doubled to ₹96.89 crore, up a massive 150 percent from ₹38.80 crore posted in the same quarter last year.
Its revenue from operations jumped 20.52 percent to ₹780.05 crore in Q2FY23 from ₹647.24 crore recorded in the corresponding quarter previous year. Meanwhile, EBITDA stood at ₹119 crore in quarter ended September 30, 2022, registering a growth of 27 percent from ₹94 crore posted in Q2 FY22. EBITDA margin also improved to 15.2 percent in the quarter under review versus 14.5 percent reported in the same period a year ago.
Commenting on the company's Q2 results, Tarak Patel, MD of the firm, said, “Building on the strong start to the year we have delivered another strong performance this quarter. Our cost control measures, especially in Europe, have helped mitigate rising energy costs, however, global uncertainties continue. Order intake and backlog numbers remain on track with all platforms showing good traction in our core as well as adjacent industries.”
Four analysts polled by MintGenie on average have a 'Hold' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
