Auto stock bonanza: LG Balakrishnan & Bros share price skyrockets over 20% this week; is there more steam to buy?
LG Balakrishnan & Bros' stock rose over 9% and hit a new 52-week high following its analysts' meeting. B&K Securities has raised its target price on the company to ₹1,443 apiece. The brokerage expects LG Balkrishna to command a higher valuation multiple in-line with other ancillary companies.
Auto components and equipment, LG Balakrishnan & Bros (LGB) emerged as the top gainer on BSE during Friday's session. The stock has touched a new 52-week high and ended at nearly 11% upside. The strong buying comes after the company's investors' meeting. Following which, B&K Securities has raised its target price on LG Balkrishna to ₹1,443 apiece as the company is expected to command a higher valuation multiple in-line with other ancillary companies.
On BSE, LG Balakrishna & Bros' share price ended at ₹1058.40 apiece, up by ₹101.70 or 10.83% on BSE. The stock hits a new 52-week high of ₹1,061.75 apiece.
Its market cap is over ₹3,268 crore at the current market price.
Overall, from June 19th to 23rd, the stock has zoomed by ₹177 or 20.5% on BSE. It saw strong rally on Friday!
So far in 2023, the stock has rallied over 49.5%. In a year, the stock has jumped by 80.6% on the exchange.
In its research note dated June 22, B&K Securities said that LG Balakrishnan has addressed market concerns about the longevity of growth by showcasing their EV opportunities and asserting the rising value content per vehicle in EVs.
Further, the brokerage explained that LGB remains resilient to the industry headwinds in the 2W motorcycle segment and B&K expects the company to continue to outperform the industry supported by an increase in SOB and key customers, higher after-market share, and an increase in exports.
Additionally, B&K highlighted the company's focus on value-added products in the metal forming division and foray into industrial Chain products (industrial chains is expected to start meaningful contribution to revenues from FY25E onwards) will drive further growth for the company.
In the overseas market, the brokerage said that the company tends to gain market share which is expected to support overall volume growth for the company.
"We expect margins to be maintained at 18% and overall earnings CAGR of 14%+ over FY23-25E supported by volume growth and scale benefit," it added.
B&K is positive on LGB stock price o nthe back of better demand prospects in domestic & exports market, focus on high margin metal forming segment, entry in to industrial chain business, expected strong cash flows from operation with decent dividend payout ratio, and strong balance sheet.
"We believe concerns over EV is misplaced. With allaying fears of EV on the company's business, LGB is set to command higher valuation multiple in-line with other ancillary companies," B&K's note added.
Hence, B&K has raised its target price for LGB to ₹1,443 apiece (based on 15x FY25E earnings) as compared to the earlier target price of ₹962 apiece.
Among key triggers for LGB in the next two years are --- increase in acceptance of transmission chains product in EV motorcycle, market share gains, NCLT clearance for RSAL and increase in business scale (in the industrial chains product).
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