Hot stock: Technocraft surges 15% as Motilal Oswal sees over 50% upside

MUMBAI: Shares of Technocraft Industries rallied over 15 per cent intraday after Motilal Oswal initiated coverage on the stock with a ‘Buy’ recommendation.

The company manufactures steel drum closures and is the largest scaffolding exporter from India to countries like US, Germany & the UK. It forayed in the IT industry by acquiring Canada-based Swift Engineering in April 2013.
According to the report, Technocraft's drum closure division commands EBITDA margins of 30 per cent along with an ROCE of over 70 per cent, thereby generating robust free cash flows.

Revenues and profits from scaffolding business have grown at a CAGR of 32 per cent and 45 per cent respectively over the last three years. The management has guided for a 25 per cent topline growth in the coming years which we believe is achievable.

Its IT division clocked revenues of Rs 73 crore in FY14 (7 per cent of revenue) along with EBITDA margins of 14 per cent, in line with that of the company.

“We believe Technocraft is available at attractive valuations of 4.7x FY17E EPS. Our SOTP based price target for Technocraft is at Rs 300 providing for an upside of 54 per cent over the next one year,” the report said.

At 11:30 am, the stock was at Rs 226.35, up 14.52 per cent, on the BSE. It rallied 16.36 per cent to touch intraday high of Rs 230. Over 90,000 shares were traded in the counter against a two-week average of 18,000 shares.