UBS on midcaps: Bullish on Astral, sees downside in Bharat Forge; check why

UBS hosted executives from 10 midcap companies, including Astral, Bharat Forge, Kaynes Technology India, Quality Power, Angel One, Bandhan Bank, among others during Emerging India Mid-Cap Conference

Global brokerage UBS has reiterated a ‘Buy’ rating on Astral, maintained a ‘Neutral’ stance on Angel One and Bandhan Bank Ltd, and assigned a ‘Sell’ rating on Bharat Forge, following discussions with company executives at its Emerging India Mid-Cap Conference.

 

The brokerage hosted executives from 10 midcap companies, including Astral, Bharat Forge, Kaynes Technology India, Quality Power Electrical Equipment, Angel One, Bandhan Bank, Granules India and Radico Khaitan during the first day of the conference.

 

UBS retained a 'Buy' rating on Astral with a target price of ₹1,900, saying that the recent PVC price hikes of about ₹12 per kg in March could support realisations and margins. The company also expects market share gains driven by capacity additions at its Kanpur and Hyderabad plants, while Ebitda margins in its UK adhesive business are expected to normalise over the next 12 months. Ebitda stands for earnings before interest, tax, depreciation and amortisation.

 

 

On the other hand, the brokerage maintained its 'Sell' call on Bharat Forge with a target price of ₹1,365, despite the company guiding for 12-14 per cent revenue CAGR (compounded annual growth rate) over the next three to four years. Analysts pointed to potential downside risks from delays in defence orders, though the company expects strong growth in aerospace and casting businesses. Bharat Forge also aims to double its aerospace revenue to about ₹7 billion within two to three years.

 

In the electronics manufacturing segment, Kaynes Technology reiterated its FY28 revenue target of $1 billion, supported by growth in aerospace and non-Kavach railway segments. The company guided for FY26 revenue of ₹40-41 billion, with strong contributions expected from OSAT and printed circuit board (PCB) businesses. It expects the core EMS to grow by 35-40 per cent from existing customers and 50 per cent overall.  "The OSAT plant may begin by Q1, with 40-50 per cent utilisation in FY27, and an 18 per cent Ebitda margin at scale. The PCB plant is ready, with revenue from Q1 and a 20 per cent Ebitda margin," the brokerage mentioned in its note. 

 

Power equipment manufacturer Quality Power said it expects around 50 per cent year-on-year (Y-o-Y) revenue growth, backed by a ₹13 billion order book and strong demand for high-voltage transformers. About 60 per cent of the company’s revenue comes from exports and 40 per cent from India.

 

"Capacity expansion is underway with a 9x increase in high-voltage coils. The company views a lack of new 220-800kV entrants as supportive for a long growth runway," the brokerage said.

 

Among financials, management of Angel One expects to sustain its brokerage market share, with regulatory compliance acting as a barrier to new entrants, according to UBS. The brokerage has a 'Neutral' rating on the stock with a target price of ₹2,900. The company is also using data analytics for client acquisition and cross-selling beyond brokerage, while focusing on diversification into mutual funds and credit distribution. Angel One is among the top two players in incremental SIP flows, UBS said.

 

Meanwhile, management of Bandhan Bank said the lender has maintained its credit cost guidance of 1.6-1.7 per cent by FY27, UBS said. The bank noted that slippages have improved sequentially over the past few months and expects a limited operating impact from the West Bengal election and the Bihar microfinance bill. UBS maintains a 'Neutral' rating on the stock with a target price of ₹220.  Disclaimer: The views or investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.