MM Forgings, Satin Creditcare And Savita Oil: HDFC Securities Initiates Coverage With 'Buy'

HDFC Securities has initiated coverage on three stocks—MM Forgings Ltd., Satin Creditcare Network Ltd., and Savita Oil Technologies Ltd.—after they gained sharply on a year-to-date basis.

MM Forgings is up 21.87%, while Satin Creditcare Network has jumped 81.73% and Savita Oil Technologies has gained 48.30% so far this year.

HDFC Securities Retail Research has set a target price of Rs 394 for Savita Oil Technologies, implying an upside of 15.59%.

The target price for Satin Creditcare Network is at Rs 188, implying an upside of 13.77%, while its target of Rs 1,007 apiece for MM Forgings suggests a potential upside of 11.74%.

Here’s what HDFC Securities said about the three stocks:

Among key triggers, HDFC Securities cited expectation of higher volume recovery due to demand resurrection; the merger of Savita Polymers leading to expansion in the product portfolio and market reach; increasing market share via collaboration with OEMs, auto companies, and logistics companies; and the company's foray into electric vehicle battery charging points.

Savita Oil Technologies is engaged in manufacturing petroleum derivative specialty products like transformer oil, liquid paraffin, petroleum jelly, white mineral oil, and automotive and other industrial lubricants.  

The brokerage started covering Satin Creditcare Network because the company is focused on growth, stable asset quality, and other fundamentals.

Positive triggers for the company include the likely growth in microfinance contribution to India's GVA and the easing of regulations by the RBI, it said.

There are efforts by the company to increase the share of secured offerings in its product mix by diversifying geographical concentration, insulating the balance sheet from additional stress post-restructuring, and improving cost efficiencies.

With its wide geographic reach in the microfinance industry, the company could use its subsidiaries to get into the micro, small and medium enterprise, and housing finance markets. This would boost growth, even though the quality of its assets would be lower.

The stock trades at 2.6 times the 30-day average volume.

The capacity expansion of MM Forgings to 1,30,000 tonne by the end of FY23 and its focus on electric vehicle products, including the addition of machined products to its portfolio, would drive margins higher.  

HDFC Securities expects recovery in the commercial vehicle growth volume, the impact of the scrappage policy on commercial vehicle demand, and the company's capacity expansion plans as positive triggers for MM Forgings.  

While the company's export profile remains strong, HDFC Securities said that the "China +1" strategy could lead to increased exports.

MM Forgings is the third largest forging company in India, with a significant share of forging products for the commercial vehicle segment in both the domestic and export markets.  

Out of the four analysts tracking the stock, all four maintain a 'buy' rating on the stock. The stock trades with a return potential implying an upside of 19.4% over the next 12 months.

The consensus rating or the average rating of all the analysts tracking the scrip stands at five points implying a blanket 'buy' rating.