SBI Securities suggests buying this midcap stock for 3 months, check target price

Midcap stock to buy: Brokerage SBI Securities has picked a midcap stock for its investors today, June 13 for a gain of up to 7 per cent. The brokerage suggests buying the stock for short to medium term.

On Thursday, the domestic indices Sensex closed 204.33 points or 0.27 per cent higher at 76,810.90, and the Nifty was up 75.90 points or 0.33 per cent at 23,398.90.

Stock to buy

SBI Securities has recommended buying Surya Roshni shares for three months. 

"The recommendation is meant for short-term investment purposes with a holding period between 1-90 days and a target upside of up to 10 per cent (+/- 0.5 per cent). The recommended price is the previous day’s closing NSE price (except the stock only listed on BSE)," said the brokerage.

Surya Roshni- Target price

SBI Securities suggests buying the stock for a target price of Rs 677.6 per share. This implies to an upside of over 7 per cent from its closing price of Rs 630 each on Thursday, June 13.

Brokerage SBI Securities' view on Surya Roshni

The brokerage says that around 70 per cent of the capex is towards value-added products. This will enable the company to increase its VAP. The following pipes generate EBITDA/t ranging from highest to lowest:
(a) API pipes: Rs 11,000/t – Rs 15,000/t, (ii) Galvanized iron pipes: Rs 6,500/t – Rs 7,000/t, (iii) Black pipes: Rs 4,500/t, (iv) Hollow section
pipes: Rs 2,000/t and Cold rolling strips: Rs 1,500/t

"Improved capacity utilisation, working capital optimisation, and cost rationalisation enabled it to become a debt-free company as it repaid total debt of Rs. 400 crore in FY24, the brokerage added.

However, SBI Securities also says that the company can also face volatile raw material prices; adverse macro factors; slowdown in demand, etc.

Surya Roshni profile

Surya Roshni develops lighting & consumer-durable products. The company has built a stronghold in the steel pipes & strips business. 

The company's steel pipes & strips business manufactures a wide range of products and is the largest manufacturer of GI pipes in India and the largest exporter of ERW Pipes. The business has further strengthened with the set-up of a 3LPE coating facility unit in 2018 (mainly for oil & gas and CGD sector) and direct forming technology (DFT) in April 2022. Its lighting business makes an array of conventional to modern LED lighting. 

Surya Roshni Q4 earnings

Surya Roshni declared its Q4 results on 14 May 2024. The company reported a decrease in revenue by 3.29 per cent and a decline in profit by 33.2 per cent YoY. However, there was a growth in revenue by 7.36 per cent and profit by 15.34 per cent compared to the previous quarter.

Surya Roshni stock performance

In terms of market performance, Surya Roshni delivered more than 10 per cent return in the last 1 week, 27 per cent return in the last six months, and -21.4 per cent year-to-date (YTD) return. These figures depict a mixed performance of the company in the market.

Meanwhile, shares of Surya Roshni closed trading at Rs 626.95 each, up 1.42 per cent on BSE today, June 13.