Down 50% from 52-week high, still up 2900% in 5 years! Buy, 43% upside likely, says SBI Sec

Smallcap stock idea: Multibagger Goodluck India Ltd has fallen 50 per cent from its September 2024 high of Rs 1,345, but is still up 2908.41 per cent in the past five years. If one were to go by, this smallcap stock has potential to deliver 43 per cent return over the next 12-18 months, thanks to engineering solutions provider's foray into high margin value added products.

Goodluck India manufactures a wide range of engineering structures, precision/auto tubes, forging for defence & aerospace, CR products and GI pipes.

SBI Securities believes Goodluck India has stellar growth potential due to foray into Hydraulic tubes business by successfully establishing a 50,000 metric tonnes (MTPA) facility with plans to double it to 1,00,000 MTPA in the future. It noted that the company has successfully established of high-margin defence business through its subsidiary for the manufacturing of artillery gun shells.

"We have valued the business at 15 times P/E multiple based on its FY26E earnings and arrive at a target price of Rs 947, thus providing an upside potential of 43.4% and assign a BUY rating for the stock," the brokerage said.

Goodluck India has healthy business relations with marquee clients across the public and private domain, it said while expecting expansion in Ebitda per tonne post stabilization of operations across the newly set up hydraulic tubes and defence & aerospace business. SBI Securities also sees positive demand outlook for solar torque tubes in the long run.

Overall, the brokerage expects Goodluck India to report revenue growth of 13.6 per cent, Ebitda growth of 18.1 per cent and net profit growth of 25 per cent, compounded annually, over FY24-FY26.

Goodluck India has commissioned a new manufacturing unit for hydraulic tubes as part of a greenfield project, with an installed capacity of 50,000 MTPA. These hydraulic tubes will serve as an import substitute by replacing seamless tubes and are considered high margin value-added product, boasting an Ebitda margin of 16 per cent against the current blended Ebitda margin of 8 per cent for the company.

"We believe this product will be a game changer for the company as it will help make significant stride for growth with an expected annual revenue contribution of Rs 330 crore – Rs 390 crore by FY26 (at 60-70 per cent utilization), and a peak revenue potential of Rs 400 crore–Rs 500 crore," SBI Securities said.

In the case of Goodluck Defence and Aerospace, the commercialisation of the plant was initially expected to begin by June quarter, but is now likely to be commissioned ahead of schedule in March.

"Currently, the segment contributes 2 per cent to the overall revenue and is expected to reach the mark of 6-7 per cent over the next two years which will be aided by the plant commercialization. For FY26, we anticipate the plant to operate at a capacity utilization of 60-70 per cent, resulting in an Ebitda margin of around 18-20 per cent. We estimate that, at full capacity utilization, this vertical will contribute between Rs 300 crore- Rs 350 crore," SBI Securities said.