Up 18% in 2 months! DAM Capital sees another 23% upside in this newly listed stock. Should you buy?

Stocks to buy: Shares of Bansal Wire Industries, the second-largest steel wire and the largest stainless steel wire manufacturer in India, have rebounded sharply in recent sessions—rising 12% over the past six trading days and 18% in the last two months.

Building on this momentum, domestic brokerage firm DAM Capital has initiated coverage on the stock with a 'Buy' rating and a target price of ₹481 apiece, implying a further upside of 23.3% from its latest closing price of ₹390. The company shares debuted on Indian stock exchanges in July 2024, currently trading 51.6% above its IPO price of ₹256.

The brokerage highlighted Bansal Wire’s consistent market share gains in a highly fragmented industry over the past decade and noted that the company has now embarked on a major expansion. Bansal Wire capacity is expected to increase by 62% once India’s largest single-location steel wire plant at Dadri (420 kt) is fully commissioned by H1FY26, taking the total capacity to 679 kt by FY26.

Dadri plant to boost capacity by 62%; poised to match Tata wires

The Dadri expansion will also mark the company’s entry into the higher-margin specialty wire segment while enabling economies of scale. With a strong execution track record and a clear focus on outpacing market growth, DAM Capital believes the company is well-positioned for its next growth phase.

The brokerage expects a 6% CAGR in unit profitability between FY25 and FY27, driven by improving margins and also the company to enter the bead wire and LRPC segments, a key product area currently missing in its portfolio compared to peers. Once operational, BWIL’s capacity will be on par with current market leader Tata Wires (670 kt).

BWIL has consistently outpaced market growth, delivering a 26% EBITDA CAGR over FY13–23, and is expected to continue gaining market share from unorganized players. DAM Capital also emphasized the company's diversified revenue base, with over 5,000 customers, none contributing more than 5% of total revenue.

The brokerage considers FY26 to be an inflection year for BWIL, during which it will prioritize volume growth at the expense of margins, with profitability expected to normalize in FY27.

BWIL, through its new subsidiary BWI Steels Limited, is also setting up a 180 kt stainless steel manufacturing facility in Gujarat. This backward integration initiative will use scrap to produce rods and is expected to be commissioned in FY28. The brokerage believes this will enhance profitability in the stainless-steel wire segment by an estimated ₹4,000–5,000 per ton in EBITDA.

Strong earnings outlook

Amid the expected surge in volumes and a better product mix, DAM Capital projects revenue/EBITDA/PAT to grow at a CAGR of 31%/35%/38% over FY25–27. While BWIL will continue incurring capex for backward integration and steel cords, leverage ratios are expected to improve, and ROCE/ROE is likely to remain in the high teens on a steady-state basis.

“Approval for steel cords from tire manufacturers will be a key milestone. We believe this will unlock the next phase of growth for BWIL, potentially increasing its specialty wire capacity from 26 kt to 100 kt,” the brokerage added.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.