ICICI Securities has reiterated its Buy rating on 3M India, keeping its target price at Rs 33,500, even as the stock trades around Rs 29,500. The brokerage sees strong growth potential for the company over the next few years, despite some recent softness in quarterly numbers.
Key Highlights:
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Growth Projections: I-Sec expects 3M India to deliver a revenue CAGR of about 11.7% and profit after tax CAGR of 22.8% between FY25 and FY27. The firm believes the company’s return on equity will remain comfortably above its cost of capital.
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Valuation: The target price of Rs 33,500 is based on a discounted cash flow (DCF) model, implying a price-to-earnings ratio of 50x FY27 estimated earnings. This valuation reflects confidence in 3M India’s ability to expand margins and tap into new export opportunities as the parent company considers sourcing more products from its Indian arm.
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Business Drivers: I-Sec points to several growth engines for 3M India, including a likely uptick in manufacturing activity across sectors like electronics, automotive, and infrastructure. The healthcare segment is also expected to remain strong, while the company could benefit from rising export potential.
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Risks: The main risks flagged are higher input costs, rising competition, and any delays in new product launches. There’s also some caution around the recent downward trend in quarterly earnings and price momentum.
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Peer Comparison: While 3M India’s fundamentals remain solid, the stock is currently trading at a premium to its estimated intrinsic value, but I-Sec believes its long-term outlook justifies the price.
Sources: Economic Times, Moneycontrol, ICICI Securities, Smart Investing