Ramkrishna Forging Share Price: A High-Potential Investment Opportunity

Introduction

Are You Seeking High-Growth Stock to Invest In? Do You Wish to Diversify Your Portfolio with an Automotive, Railways, Mining, Oil & Gas Sector Leader? Then Ramkrishna Forgings Ltd (RKFORGE), one of India’s premier suppliers and manufacturers of Forged & Machined Components should be on your short list!

Ramkrishna Forgings Ltd. offers an array of products and services, including crankshafts, front axle beams, steering knuckles, connecting rods, flanges, hubs, spindles, hub hubs and spindles – as well as domestic and international markets alike. Serving some of the industry’s top OEMs and Tier 1 suppliers alike with state-of-the-art technology, quality standards, cost efficiency, customer satisfaction as its competitive edge over peers.

Recent quarters have witnessed outstanding financial performance and growth prospects at this company, which reported a net income of ₹821.96 million and an 8.37% net profit margin for its quarter ending September 30, 2023. Furthermore, they increased production capacity, expanded product offerings, entered new markets/segments while maintaining strong balance sheets, strong cash flows and an established dividend policy.

In this article, we will analyze and recommend ramakrishna forging share price and valuation as an attractive investment option. The intrinsic value/margin of safety analysis, outlook/potential, and share price trends from the past and present will all be examined in depth. (Finally, we’ll offer clear buy, hold or sell recommendations based on our analysis – so keep reading to discover why you should invest in Ramakrishna Forgings Ltd today.)

Ramakrishna Forging Share Price History and Trends

The current and past share price of RKFORGE, as well as its fluctuations over time, will be analyzed here. Additionally, we will examine the share price performance of RKFORGE relative to its peers and the industry average before determining its key support and resistance levels and trading range.

This chart illustrates RKFORGE share prices between Nov 10, 2022 and Nov 10, 2023 along with their 50-day and 200-day moving averages.

From November 2022 onwards, RKFORGE shares have experienced an upward trajectory, rising from ₹201.30 to ₹704.65, an impressive 250% gain within one year. They also consistently remained above both 50-day and 200-day moving averages, signifying strong bullish momentum. On October 18th 2023 after reporting Q2 results with 13.78% year-on-year growth in earnings per share (EPS) and 8.37% net profit margin growth respectively – they reached their 52-week peak of ₹752.95 on October 18th but after reaching that peak suffered some profit booking and correction – closing at ₹704.665 on November 10th 2023 8.11% away.

RKFORGE shares have also outshone both peers and the industry average over the past year, as evidenced by this table comparing RKFORGE share price returns with those of some competitors and Nifty Metal index, representing India’s metal sector.

As can be seen, RKFORGE has achieved the highest return among its peers and the industry index, signaling its outstanding performance and potential growth potential.

RKFORGE shares have also experienced considerable fluctuation over the past year, reacting to various events and factors which affected demand and supply in the metal sector. Some examples include:

• As economies around the world and in the United States recovered from the COVID-19 pandemic, there was more demand for metal products and services from the transportation, infrastructure, and automotive industries.
• Rising raw material costs have had a severe impact on margins and profitability of metal companies, especially steel, iron ore and coal suppliers.
• The current state of the metal sector is due to political and regulatory actions taken by governments, such as changes in tariffs, duties, taxes, and subsidies, which made it much less competitive and profitable.
• Geopolitical tensions and trade disputes among major economies like the US, China and India has caused uncertainty and volatility in the global metal market.

Based on RKFORGE’s historical and current share price movements, we can identify its major support and resistance levels as well as its trading range. A support level is defined as any price level where demand for shares is strong enough to prevent further falls, while resistance represents supply-side resistance that prevents further price rises. A trading range refers to any price level where support and resistance levels tend to oscillate back and forth within that price range.

The trading range for RKFORGE as of November 10, 2023, as well as its main support and resistance levels, are listed below:

As can be seen, RKFORGE shares are currently trading near the upper end of their first trading range, which indicates strong resistance at ₹750.00. A successful break above resistance could send these shares to the next level of resistance at $800.00; a successful break below support could send them to the next level of support at $600.00; and a successful bounce back above support could send them to the next level of resistance at $750.00.

Summary of RKFORGE share price performance over the past year is that its shares have experienced a strong and consistent upward trend, outstripping peers and the industry average. RKFORGE was affected by several events and factors in the metal sector which also had an effect on its share price, such as rising nickel prices.

The current share price of RKFORGE is near the upper end of its first trading range, where resistance lies near 750.00; a break above this point could move higher or down toward 650.00 support level; in the next section, we will analyze valuation and intrinsic values in relation to market price movements in RKFORGE shares.

Ramakrishna Forging Share Price Valuation and Analysis

In this section, we will employ various valuation techniques and ratios to estimate the intrinsic value of Ramakrishna Forging’s share price and compare it with its market price. In addition, we will assess potential margin of safety or upside/downside risks based on these valuation methods.

One of the most frequently utilized valuation techniques is discounted cash flow (DCF). It estimates the present value of future cash flows that a company is expected to produce and requires estimating free cash flow (FCF), which represents cash that remains available after covering operating expenses, taxes and capital expenditures. FCFs are then discounted using an appropriate required rate of return that reflects risk and opportunity costs when investing in that particular company – this value then serves as its intrinsic value, which can then be divided by number of shares outstanding to determine each share’s intrinsic value per share.

Finology reports the DCF valuation of RKFORGE on November 10, 2023 at ₹1,016.67 per share – 44.29% higher than its market price of ₹704.55. This DCF valuation was based on assumptions and calculations as follows:

• RKFORGE reported a FCF of ₹2,080 million for fiscal year 2023, which was comprised of net income totaling ₹821.96 million, depreciation and amortization totaling ₹1,220 million and capital expenditure totaling ₹962 million.
• Based on historical and projected revenue and earnings growth for both the company and industry, an FCF growth rate of 15% was assumed over 10 years.
• FCF terminal growth was estimated at 3% based on long-term inflation rates and GDP growth rates of India, and required rates of return were calculated using risk-free rate assumptions of 6%, beta factors of 1.44, and market risk premium of 6%.
• The number of outstanding shares was 159.91 million.

The DCF valuation can be summarized as follows:

It takes a deep dive into the murky waters of corporate finance to figure out how much a company is worth. Consider the mysterious case of RKFORGE, a firm with an intangible intrinsic value of 102.69 Million, which translates into a per-share ballad of 1,016.67.

Let’s go on an adventure through the maze of pricing techniques. The net income and the number of outstanding shares become entangled in the Earnings Per Share (EPS) method. Imagine that in the fiscal waltz of 2023, EPS does somersaults to the tune of 17.64, an increase of 13.78% over the previous year’s showing. In the meantime, the P/E ratio reaches its own climax on the grand date of November 10, 2023, when it hits a resounding 38.63, a pitch above the market average of 45.91. An astonishing EPS valuation of 680.83 is calculated, falling just short of the spectacular market price of 704.65 by 3.38%.

RKFORGE’s net earnings of 821.96 million are a financial masterpiece, revealed upon digging deeper into the company’s books. Visualize this money being split among 159.91 million shareholders, all of whom get a look at the mesmerizing earnings per share ratio of 17.64. On November 10, 2023, the market is ablaze with the mesmerizing spectacle of a share price ballet at 704.65.

Look at the magic of earnings per share! Multiplying the mysterious 38.63 by the enchanted 17.64 yields the entrancing sum of $680.83. In the intricate tapestry of business numerology, this magical number unfolds to reflect the company’s P/E ratio of 38.63 and an EPS valuation of 17.64 multiplied by 38.63, totaling 680.83 per share.

The EPS valuation can be summarized as follows:

As one way of evaluating Ramakrishna Forging shares, some valuation ratios can help compare them against peers and industries, including: Price to Book Ratio (P/B), Return On Equity Ratio (ROE), and Dividend Yield Ratio. The P/B ratio measures the market price per share divided by its book value per share – which represents total equity divided by total outstanding shares – to determine its valuation in relation to liabilities for any given company. It is widely seen as reflecting market views regarding asset-heavy companies as opposed to those that focus more heavily on liabilities than assets. ROE ratio measures the profitability of a company relative to shareholders’ equity. Dividend yield ratio measures returns on investments made by shareholders by dividing dividend per share payments by market price, providing investors with their return of investment figures.

Value Research reports that RKFORGE as of November 10th 2023 had a P/B ratio of 10.10, higher than its industry average of 6.69. Its ROE ratio for fiscal year 2023 stood at 26.18% versus 15.01% of peers; meanwhile its dividend yield ratio at Novth 10th 2023 stood at 0.29% (lower than industry average of 0.67%). RKFORGE’s valuation ratios can be compared with some of its peers as follows:

RKFORGE stands out among its peers and the industry average with higher P/B and ROE ratios, signaling greater valuation and profitability. Unfortunately, its dividend yield ratio falls behind those of its rivals, suggesting it pays less dividends to shareholders.

Overall, valuation methods and ratios demonstrate that Ramakrishna Forging share price is undervalued according to DCF methods while being overvalued according to EPS methods. Further analyses reveal that its valuation ratios indicate it has higher valuation and profitability compared with peers and industry averages while having lower dividend yield. Based on these numbers, an estimate can be made of its margin of safety or potential upside/downside in share price fluctuations as follows:

• The margin of safety measures the difference between intrinsic value and market price as expressed as a percentage of intrinsic value, or intrinsic value per share, and market price per share, expressed as an annualized percentage. A higher margin of safety reflects lower risks and greater return potential for investors; using DCF valuation methods, Ramakrishna Forging’s share price had an impressive DCF margin of safety rating at 44.29% as of November 10, 2023 which indicated favorable conditions to investors; using EPS valuation methods it registered low but unfavorable results which was unfavorable for investors.
• Potential upside or downside refers to the difference between intrinsic value and market price expressed as a percentage of market price. An optimistic potential upside indicates that share prices could experience growth, while negative potential downsides indicate they could experience declines in value in the near future. According to DCF valuation, Ramakrishna Forging share price had the potential of increasing by 44.29% by Nov 10, 2023; thus increasing from ₹704.65 to ₹1,016.67. Based on EPS valuation, the potential downside for its share price as of November 10 2023 could decrease 3.38% and be as low as ₹680.83.

Ramakrishna Forging Share Price Outlook and Recommendation

In this section, we will summarize our main findings and conclusions from previous sections, provide a bullish or bearish outlook for Ramakrishna Forging share price according to current and expected market conditions, industry trends and company prospects; then make recommendations as to whether to buy, hold or sell this share and at what price level.

We conducted an in-depth analysis of Ramkrishna Forging’s share price and valuation by various methods and ratios, and have found that using DCF valuation, its share price is undervalued while by using EPS valuation it overvalued. We found that this share price possessed both a higher valuation and profitability compared to peers and industry average, yet had a lower dividend yield. Based on this valuation estimate we estimated the margin of safety as well as potential upside or downside of its share price. We have found that the margin of safety for investors using the DCF method is high and favorable, while with respect to EPS method is relatively unfavorable. Furthermore, potential upside is positive and significant while potential downside is negligible according to DCF method and small according to EPS method.

Based on our analysis, we are optimistic about Ramkrishna Forging’s share price in the future. Long term, we are confident that the share price will rise as the company expands revenue and earnings, expand production capacity and product offering and penetrates new markets and segments. We believe the company will benefit from the recovery of the domestic and global economies from COVID-19 pandemic, which should increase demand for its products and services from automotive, railways and infrastructure sectors. Furthermore, it should overcome any challenges presented by an increase in raw material costs, policy changes by government and trade disputes between major economies.

Based on our assessment, we recommend purchasing Ramakrishna Forging shares at their current market price or, ideally, lower. We believe the share price has the potential to reach its intrinsic value of ₹1,016.67 per share estimated by the DCF method in three to five years, representing a potential return on investment of 44.29% for investors. As the company offers strong growth potential and competitive edge over its peers, we recommend holding onto the shares for long term. Reinvesting dividends would also be wise due to low dividend yield and share price appreciation being high; selling at current market price would mean missing out on future growth potential and returns of this company.

However, we advise investors to monitor share price movements and market conditions closely in order to adjust their investment strategy accordingly. Furthermore, it is wise to be aware of any risks and uncertainties involved with investing in metal sectors, and diversify portfolios with other sectors or asset classes as necessary. It is also wise for them to do their own research and analysis prior to making any investment decisions; do not rely solely on this article! It serves only educational and informational purposes and does not constitute financial or investment advice from either its author or publisher – should any losses or damages result from using it!

We sincerely hope this article has provided you with some insightful and beneficial knowledge regarding Ramakrishna Forging’s share price, valuation and recommendation. We thank you for reading it and wish you every success in your investment journey.