Buy Arcotech; target of Rs 73: Joindre Capital
Joindre Capital’s research report on Arcotech
Arcotech Limited has been promoted in 1981 for manufacturing Non-Ferrous Engineering products produces all Non-Ferrous alloys i.e. Copper, Brass, Phosphor Bronze, Nickel Silver, Nickel Brass, Cupro Nickel, Aluminium Bronze, Tin Bearing Copper and Silver Bearing Copper etc. These are produced in the form of semis like ingots, strips, sheets, plates, foils, bus bars, rods as well as coin blanks, key blanks, terminals, connectors, etc. Arcotech operates out of its state of the art manufacturing facility located at Bawal, Haryana with a total installed capacity of 30,000 MTPA & has one of the largest capacities of Copper Based non-ferrous semis & is the only player to India to have all the 4 casting methods including DC casting, Continuous Casting, Mould Casting, and Up Casting with Confirming Lines at one location. Arcotech has more than 150 OEM customers and is also registered with several Government of India Units in Defence, Mint and the Energy Sector.
The Arcotel stock trades at a P/E of 16x and 13x based on FY19E and FY20E, which does not look very expensive looking at future potential for the domestic prospects for the Copper and Coin as well Defence and Mint business Arcotech enjoys as on date. Also valuations at 0.6x Market Cap to Revenue based on FY19E don?t look very expensive. Also the stock is available at a market cap of Rs 571 crs against a EV of around Rs 890-900 crs as on FY18 which is also attractive if one considers the long term potential and hence we believe that the Arcotech stock should be purchased at the current price for a price target of around Rs 73 over the next 12 to 15 months.
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