Newly listed stock falls 18% in a month. Should you buy?

Tega Industries sales in 3Q met guidance, however, lag in passing raw material costs and material rise in other expenses led to lower EBITDA and PAT, highlighted brokerage JMFinancial. EBITDA was impacted adversely owing to cost escalations – higher RM costs, ocean freight rates, and normalisation other overheads. 

Although Dynaprime liners reported a relatively slower growth, the company has maintained 25-28% growth guidance in the segment, as 2H is better owing to overlap with the shutdown period for mining sites, JMFinancial believes. While RM costs are likely to be passed on with a lag (60% gross margins), company is likely to absorb the freight costs partially, it added. 

“Overall, the penetration opportunity for Dynaprime liners continues to remain strong and cross selling of other products will help outpace the industry growth, while recent correction in stock price (-18% in 1 month) has turned risk reward favourable,” the brokerage added. It has upgraded the newly listed stock to Buy rating with a target price of ₹590 per share.

Although, the company will pass on the raw material costs over 2 quarters (gross margin guidance of 60%), management highlighted that freight cost escalations may not be passed on completely, the brokerage note stated.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.