Ashish Kacholia Stocks: Stove Kraft stock poised for up to 43% upside on strong growth trajectory, says brokerage

Ace investor Ashish Kacholia-backed cooking appliances company – Stove Kraft shares are likely to grow up to 43 per cent as the firm’s growth is getting back on track, YES Securities said in its report while analysing its March quarter results for the financial year 2021-22 (Q4FY22). 

Given the massive correction this stock has witnessed, it is unlikely to see any further downside, YES Securities opines. The brokerage remains positive on the stock and maintains a Buy rating with a target of Rs 777 per share. It believes that the company should be able to grow in the high‐ teens and margins are also close to the bottom.  

Kacholia, who is fondly called a 'Big Whale' of the Indian stock markets, holds 576,916 equity shares, which translates into 1.8 per cent stake in Stove Kraft, as per the latest shareholding pattern of the company available on the BSE. 

Stove Kraft is aggressively adding new distribution touchpoints which will reduce its reliance on e‐commerce in addition to entering new businesses, the brokerage noted. It continues to maintain BUY as the current risk‐reward has turned favorable and there is a significant upside from current levels.    

Yes Securities estimates a revenue CAGR of over FY22‐24E of 17.4 per cent which is lower than the management guidance of 25 percent revenue growth and builds in a lower EBITDA/PAT CAGR of 31%/35% as it believes that the company will keep prioritizing growth. 

It also foresees a stable growth outlook in the domestic market coupled with increasing exports driving above‐industry growth rates for the company, with continued backward integration and working capital reduction helping sustain strong return ratios. 

The management does not see any challenges in terms of demand and expects the margin to recover as the company has initiated a 4‐5 per cent price increase in Q1 and commodity prices have corrected from their peak.  

The stock on Tuesday closed flat with a positive bias or up 0.5 per cent to Rs 543 per share as against over 1 per cent fall in the S&P BSE Sensex. The stock in the last six months has been corrected by over 44 per cent as compared to an over 6 per cent fall in the benchmark index.