Ramkrishna Forgings surges 9% on emerging lowest bidder for Railways order

Shares of Ramkrishna Forgings (RKFL) hit a record high of Rs 289.30 as they surged 9 per cent on the BSE in Wednesday’s intra-day trade after the company emerged as the L1 bidder for manufacturing and supply of forged wheels.

Ramkrishna Forgings and Titagarh Wagons (RKFL-TWL Consortium) emerged as the lowest bidder (L1) as per the financial bid opening dated 14 March, 2023, for manufacturing and supply of forged wheels under Aatma-Nirbhar Bharat by the Ministry of Railways, Government of India, the company said in an exchange filing.

The total quantity of forged wheels to be supplied will be around 1.54 million wheels over a period of 20 (twenty) years. Intimation regarding Letter of Award (LOA) will be submitted as and when the LOA will be received, the company said.

Meanwhile, in past six months, the stock price of RKFL has zoomed nearly 40 per cent, as compared to 3 per cent decline in the S&P BSE Sensex. In past one year, it has rallied 51 per cent, as against 4.4 per cent rise in the benchmark index.

RKFL manufactures forged and computer numerical control machined components for the automobile, railways, defence, oil& gas and mining sectors. It manufactures components for transmission and axles including shafts, gear box, crown wheel, pinion, spindles and bearing rings for the auto sector. RKFL has six manufacturing facilities in India and has a total installed capacity of 187,100 tonnes.

India Ratings and Research (Ind-Ra) expects the consolidated revenue in FY23 to be between Rs 2,600 crore and Rs 2,800 crore and increase further to over Rs 3,000 crore on the back of a healthy order book and a ramp up of the increased capacities. However, the likelihood of macro-headwinds in the exports market could limit the company’s growth plans, it said.

Ind-Ra expects the consolidated EBITDA margins to remain at 21 per cent-22 per cent in FY23-FY24, supported by the improving operating leverage. Moreover, the margins over 4QFY23-FY24 are likely to benefit from the easing raw material prices. The company also has the ability to pass on the raw material price increases to customers, in both its domestic and export markets, although with a lag, the rating agency said in rating rationale.

The management expects the capex to come down materially from the historical levels, resulting in a deleveraging of the balance sheet from FY24. RKFL’s credit metrics remain a key monitorable due to the capitalintensive nature of the business and ongoing acquisitions. Ind-Ra expects the leverage to be around 3x in FY24.

Technical View Bias: Overbought Key Levels: Rs 284.50; Rs 282 .

The stock has been trading with a positive bias since mid-July 2022, after its 20-DMA surpassed the 50-DMA (Daily Moving Average). The bias remains positive as the 20-DMA at Rs 269.30 is above the 50-DMA at Rs 268. .

The stock is presently seen trading above the higher-end of the Bollinger Bands on the daily chart, which stands at Rs 284.50, which again is a bullish sign. .

However, since the stock has zoomed 99 per cent from its June low of Rs 146, some sort of a consolidation seems warranted. The monthly chart indicates that, in case, the stock fails to sustain above Rs 282-odd levels, a corrective phase may begin. On the downside, the stock could test Rs 240-odd levels. .

(With inputs from Rex Cano) .