Defence Stock in focus: Goldman Sachs has reaffirmed their bullish view on Azad Engineering by retaining their “Buy” rating with a target price of Rs 2,200, which implies significant upside potential in the stock. The positive view by the brokerage firm is driven by robust strategic development, long-term growth prospects, and a rising margin profile.
One major highlight in this regard is the long-term contract between Azad Engineering and Mitsubishi Heavy Industries, who are one of the world leaders in manufacturing in both industries. The notable feature is that Azad has been selected as a single-source supplier. This is obviously advantageous for Azad in terms of its presence in the global supply chain.
In addition to this, Goldman Sachs pointed to the company’s entry into “high-value components in the hot section,” which is an essential part of the aerospace and energy turbine manufacturing industry.
The “hot section” components operate in extreme temperature conditions and require advanced technological precision. Azad’s entry into this segment is an upgrade in its product portfolio, making it comparable to world-class companies in the industry.
Another significant catalyst, as identified by the brokerage, is the company’s ability in terms of thermal coating. This is a very advanced capability, and it is expected that this capability will be a significant contributor to enhancing the durability of the company’s products.
According to Goldman Sachs, value-added processes like this can be a significant contributor in terms of margin expansion, thus enhancing the profitability of the company.
As such, the firm believes that the company is in a sweet position to exploit opportunities in the aerospace and industrial space.
Given the high degree of execution certainty, rising share of high-margin products, and ongoing order growth, Goldman Sachs believes that Azad Engineering is in a position to generate strong earnings growth, thereby sustaining its positive view on the stock.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
