MM Forgings a conviction buy; stay invested in Bharat Forge: Mayuresh Joshi

In a chat with ET Now, Mayuresh Joshi, Fund Manager, Angel Broking, talks about his top investment ideas from forging space.

ET Now: What is your view on forging stocks such as Bharat Forge and MM Forging?

Mayuresh Joshi: In case of Bharat Forge, some money has been taken off the table as valuations were looking a bit stretched at higher levels. Having said that, looking at the core businesses of the company, I do feel that the business momentum should continue for Bharat Forge over the next couple of years.

The non-automotive business is doing exceedingly well for the company. Considering the recovery that one is expecting in the automotive segment on account of demand in US markets, existing investors should continue to hold on to the stock.

Meanwhile, MM Forgings, another auto ancillary stock, is something that we have a conviction buy on.

Our take is that the company it can significantly improve its revenues going forward as 76 per cent of its topline comes from exports. With that, 52 per cent comes from the US markets and the rest 10- 11 per cent comes from European markets. The margin expansion should be evident on MM Forgings’ balance sheet.

We expect strong topline CAGR of 16 per cement for the company over the next couple of years to Rs 700-odd crore. MKargins should sustain between 23 per cent and 24 per cent range. Even from a valuation perspective, at 9.8 times MM Forgings stock looks quite attractive. Therefore, investor should hold on to Bharat Forge, but our conviction ‘buy’ remains on MM Forgings.