UBS has initiated a Buy rating on RK Forging Limited (RKFL) with a target price of Rs 1500, expecting a 45% upside in the stock price, citing several visible earnings drivers that imply potential for earnings upgrades. The brokerage sees multiple growth avenues for RKFL, which could drive substantial revenue growth in the coming years.
UBS pointed out that RKFL is well-positioned to benefit from the higher penetration of electric vehicles (EVs) and aluminium forging. As the EV market expands, RKFL is expected to see increased demand for aluminium forging, which is crucial for reducing vehicle weight and enhancing efficiency.
Additionally, RKFL’s recent acquisitions, including ACIL, Multitech Auto, and JMT Auto, are anticipated to significantly contribute to its growth by providing new capabilities and market access. The company’s ability to secure new clients in the earth-moving, farm equipment, and oil & gas segments is also expected to diversify its revenue streams and reduce dependency on any single market.
The rail segment presents further opportunities, particularly with the Vande Bharat Express and Metro trains. UBS expects these initiatives to support a robust revenue compound annual growth rate (CAGR) of 22% during FY25-27, compared to the consensus estimate of 17%.
UBS’s optimistic outlook for RKFL underscores the company’s strong potential for growth across various sectors, driven by strategic acquisitions and the expansion of its market presence in emerging industries. The brokerage’s target price of Rs 1500 reflects confidence in RKFL’s ability to capitalize on these opportunities and deliver sustained earnings growth.
