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The metal sector regaining upward momentum after undergoing healthy retracement over past four months. Within the metal space, Vardhman Special Steel has relatively outperformed its peers. Currently, the stock has formed a higher high-low after consecutive seven weeks decline on the back of rising volumes, indicating resumption of primary up trend, said brokerage house ICICI Securities.

Thereby confirming higher base above 52 week’s EMA which has been held since June 2020. Hence, the metal offers a fresh entry opportunity with favourable risk reward setup, as per ICICI Securities which has a Buy rating on the multibagger stock that comes with a target price of 302 and stop loss of 233 with time frame of around three months.

“Key point to highlight is that over past five months, the stock has retraced merely 50% of preceding four months rally ( 134-309). Slower pace of retracement signifies robust price structure," the note highlighted.

Vardhman Special Steel is among India’s leading Steel Bar producers for Automotive applications. It has specialised product offerings which includes Steel Bars & Rods & Bright bars of various categories of special & alloy steel. It has been granted environmental clearance (EC) for expansion of capacity at its existing plant in Ludhiana.

Going ahead, the company is focussing towards improving capital efficiency and is targeting an EBITDA/Capital Employed of 25% by FY25. Furthermore, it plans to increase share of export, the brokerage note stated.

"Over the period FY21-23E, we expect Vardhman Special Steel’s topline to grow at a CAGR of 25%, while EBITDA and PAT is expected to register a CAGR (compound annual growth rate) growth of 35% and 64% respectively. Going forward, we have modelled EBITDA/tonne of 10,000/tonne each for both the years FY22E and FY23E," ICICI Securities added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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