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PL Capital Report
The brokerage firm PL Capital has initiated coverage on Usha Martin Ltd. with a ‘Buy' rating with a target price of Rs 570, implying an upside of around 22% from the current market price of Rs 466.
The brokerage is bullish on the stock, citing the company's strong positioning in high-performance wire ropes and specialty wire products, along with a strategic shift toward value-added segments and improving global market share.
Investment rationale
The brokerage highlighted that, over the last decade, Usha Martin has increased its focus toward value-added segments by penetrating the high-margin original equipment manufacturer chain competing with global players. PL Capital believes that the company is at an inflection point with its rising global market share (~4%) and leadership in the domestic market (over 60%).
Moreover, Usha Martin is expected to continue to deliver superior operating performance driven by:
- improving market share across global OEMs;
- timely expansion across its diversified end user industries;
- focus on high-value specialty-grade ropes and wires;
- improved supply-chain efficiency through the One Usha Martin initiative, and
- growing after-market revenue share.
PL Capital expect revenue/Ebitda/PAT to grow at ~10%/12%/16% CAGR over FY26-29E driven by planned capacity addition and improving utilization.
The brokerage initiates coverage on Usha Martin with ‘Buy', setting a target price of Rs 570 assigning 25x PER to Sep'28 earnings.
Key Risks
- Exposure to price competition in certain general product categories
- Slowdown in industrial and infra-activity
- Working capital and inventory intensity
- Geopolitical and supply chain disruptions
- Raw material price volatility
- Customer approval and qualification risk:
- Foreign exchange risk
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