This Small Cap Has Surged 150% This Year — Analysts Say Rally Not Over Yet

Shares of Lloyds Engineering Works have surged up over 150% this year, but analysts at Ventura see the stock scaling up further.

The Lloyds Engineering Works Analyst: Analysts at Ventura initiated coverage on the stock with a “buy” rating and a price target of ₹71 over the next two years. The target indicates an over 61% upside from the stock’s current market price of around ₹43.

The Lloyds Engineering Works Thesis: The analysts in the latest research note said that Lloyds Engineering Works looks set for significant growth with a robust ₹921 crore order book, which is three times the sales for FY2023. This substantial order book, combined with strategic investments in capacity enhancement, positions the company as a net cash entity and sets the stage for heightened revenue and profit margins. T

The brokerage anticipates revenue growth at a Compound Annual Growth Rate (CAGR) of 47%, reaching ₹996 crore by FY26. This impressive revenue growth is attributed to factors such as a higher order inflow from marine, steel, and special civil engineering projects, strategic capacity enhancement initiatives, and strategic positioning in the infrastructure and capital expenditure sector in line with increased government spending.

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Projections for LEWL’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and Profit After Tax (PAT) signal robust growth at a CAGR of 59% and 66%, respectively, reaching ₹209 crore and ₹168 crore.

The analysts have prepared both a Bull and Bear case scenario:

  1. Bull Case: Assuming a revenue of ₹1,100 crore with a CAGR growth of 52% from FY23 to FY26, and EBITDA margins of 22% at a Price-to-Earnings (P/E) ratio of 50X, the Bull Case projects a consolidated price target of ₹82, reflecting an impressive upside of 86.4% from the current market price (CMP).
  2. Bear Case: Envisioning a revenue of ₹850 crore with a CAGR growth of 39.5% from FY23 to FY26, and EBITDA margins of 20% at a P/E ratio of 35X, the Bear Case results in a consolidated price target of ₹49, indicating a more conservative upside of 11.4% from the CMP.

Price Action: Shares of Lloyds Engineering Works were down 4.93% to trade at ₹43.35 on Wednesday afternoon.

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Posted In: Analyst ColorLong IdeasPrice TargetInitiationAnalyst RatingsTrading IdeasLloyds Engineering WorksVentura