Shares of Ramkrishna Forgings are up 4.4% on BSE and currently trading at Rs. 239 a piece, amidst thin volumes, after it announced good set of numbers on Thursday 14^th August post market hours.

The company, with 4 forging facilities in Jamshedpur and Kolkata and installed capacity of 45,000 MTPA, reported net revenue of Rs. 113 crore, flat sequentially, by up 13% YoY. Q1 net profit for the company, catering mainly to heavy commercial vehicles, rose nearly four-fold to Rs. 5.9 crore from Rs. 1.5 crore in Q1FY14, with net margins expanding to 4.8%, on back of improved workings. Other income of Rs. 3.6 crore on profit on sale of shares by Employee Welfare Trust and lower depreciation charge of Rs. 1 crore due to adoption of Companies Act 2013 also favoured the bottomline. EPS of Q1FY15 stands at Rs. 2.26 as against Rs. 3.24 for FY15.

New forging press of 3,150 tons and 4,500 tons have commenced commercial production from 21^st July 2014, which should provide push to the topline, although limited, as utilizastion levels remain low between 60-75%. Commanding a market cap of Rs. 625 crore, promoter holding in the company is 48%, while foreign and local institutions hold 38%, leaving only 14% as public float. Net debt of Rs. 460 crore is seen high, resulting in debt equity ratio of 1.4:1.

Although margins have strengthened, valuations are aggressive. Current PE multiple for the stock is close to 28 times, versus sector leader Bharat Forge trading at 27 times expected FY15 earnings. Hence, caution advised.