Poor post-listing show: Is risk-reward favourable for this D-Street debutant?

JM Financial, however, has upgraded the stock’s rating to ‘buy’ from ‘hold’ with a target of Rs 590, valuing it at 25 times FY24 EPS.

The brokerage said the recent correction has turned risk reward favourable.

Tega Industries is a manufacturer and distributor of specialised, critical, and recurring consumable products for the global mineral beneficiation, mining, and bulk solids handling industry.

The company reported a 6 per cent year-on-year (YoY) rise in its debut earnings at Rs 33.60 crore for the December quarter on a 20 per cent YoY rise in net sales at Rs 257.80 crore. Operating Ebitda grew 8 per cent to Rs 51 crore, with Ebitda margin coming in at 19.8 per cent. Impact of rise in material costs led to pressure on margin, the company said, adding that the same will be passed on gradually to customers.

“Overall, the penetration opportunity for Dynaprime liners, which accounts for 19 per cent of overall revenue, continues to remain strong with an addressable market at $900 million. The cross selling of other products will help outpace the industry growth,” JM Financial said.

For the first nine months, Dynaprime liners reported a relatively slower growth of 16 per cent YoY but the company maintained 25-28 per cent growth guidance in the segment, as 2H is better owing to overlap with the shutdown period for mining sites.

“Further, non-mill products will increase the wallet share for the company. Its expansion in Chile is expected to be commissioned in 24 months (internal target of 18 months). Current revenue potential from the Chile plant is at $40 million and is expected to be doubled to $80 million post the expansion.

JM Financial has cut its EPS estimates by 7 per cent to bake in the escalation in the freight costs. “With the correction in the stock, we believe the risk reward has turned favourable. We upgrade to BUY, valuing the company at 25 times FY24E EPS,” the brokerage said while suggesting a target of 590 for the stock.

The target suggests a potential 22 per cent upside over Friday’s intraday price of Rs 484.