Buy Kirloskar Ferrous Industries Ltd. target Rs 155 : Centrum Broking

Centrum Broking has Buy on Kirloskar Ferrous Industries Ltd. with a target price of Rs 155. The current market price of Kirloskar Ferrous Industries is Rs 106.5. Time period given by analyst is year when Kirloskar Ferrous Industries Ltd. price can reach defined target.
Investment Rationale
Centrum initiated the coverage on Kirloskar Ferrous (KFIL) with a Buy and TP of Rs 155. KFIL features i) a well invested asset base with spare capacity of 50%/25% in Castings/Pig Iron, ii) increasing share of high-margin casting business, iii) cost efficiencies from upcoming low-payback projects, iv) an enviable track record of converting cash profits to cash flows (5Y/10Y AOCF/CP ratio of 1x/0.9x) and v) strong earnings growth led by higher volumes and operating leverage, buttressed by a low D/E of 0.3x. Exciting future growth prospects await KFIL’s castings business which boasts of i) a strong product profile and customer relationships, ii) sustainable competitive strengths and iii) satisfactory demand visibility. We expect an impressive EBITDA/PAT CAGR of 28%/29% during FY17-20E driven by castings volume CAGR of 19% coupled with cost efficiencies. Finally, we believe that it merits rerating based on an attractive cash flow yield of 11.4%/15.9% (FY19E/20E).