Shares of smallcap firm Pennar Industries have given multibagger returns since COVID, rallying nearly 500 percent from March 2020. The stock has skyrocketed from its COVID low of ₹11.40 to currently trade around ₹67.84, jumping as much as 495 percent in this period.
An investment of ₹1 lakh in March 2020 in the stock would have turned into nearly ₹6 lakh currently.
The stock has jumped nearly 83 percent in the last 1 year and 20 percent just in 2023 YTD, despite giving negative returns in 3 of the 5 months in the current calendar year. It has fallen nearly 5 percent in May after a 2 percent gain in April. Meanwhile, it shed 2.7 percent in March and 3 percent in January 2023. However, the stock surged over 32 percent just in February, keeping the overall returns in 2023 YTD in the green.
It is currently 21 percent away from its 52-week high of ₹85.98, hit on April 18, 2023, and has advanced 119 percent from its 52-week low of ₹31, hit on June 20, 2022.
In the March quarter, the company's results lagged analyst estimates. Its consolidated net profit jumped 41 percent to ₹23.34 crore as against ₹16.54 crore in the year-ago period. Meanwhile, its revenue for the quarter marginally fell, down 3.51 percent YoY to ₹668.43 crore versus ₹692.77 crore in the same quarter last year.
For the full financial year FY23, the company’s net profit surged 80.30 percent to ₹75.42 crore, as against ₹41.83 crore in FY22. Meanwhile, its revenue rose 27.75 percent to ₹2,894.62 crore from ₹2,265.75 crore in FY22.
Pennar Industries is a diversified engineering firm with a presence in the automotive, rail, aerospace, infrastructure, and energy sectors.
Despite the robust returns in the last 1 year, in a recent report, brokerage house Phillip Capital (PC) retained its ‘buy’ call on the stock and raised its target price to ₹93 (from ₹90 earlier), indicating an upside of 37 percent from its current market price of ₹68.
"At CMP, Pennar trades at 7.3x our FY25 earnings and 4.7x EV/EBITDA. Pennar’s revenue profile has changed significantly towards value‐added products and engineering design it is in a strong position to capitalize on any economic recovery. In the short term, working capital management remains crucial for the company. We revise valuations from 12xFY24 to 10xFY25 with a target price of ₹93 (earlier ₹90)," said the brokerage.
Despite the stellar return, it is important to note that smallcap stocks are high-risk stocks and not suitable for investors with a risk-averse approach. Only high-risk investors should invest in such stocks and in very small weightage. Please consult your financial advisor before making any changes to your portfolio.
