Smallcap firm Vinyl Chemicals has proved to be a goldmine for investors maid this volatile time. It has given multibagger returns to its investors in the last 3 months surging nearly 150 percent since July.
In the last 1 year, the stock has tripled investor wealth, rising 202 percent while in the last 5 years, it has skyrocketed nearly 800 percent.
The scrip has advanced over 30 percent each in July (31%), August (39%) as well as September (35%) so far.
Despite surging 35 percent in September so far, the stock had shed 29 percent in seven sessions from September 19-27. The stock had hit its 5 percent lower circuit in each of those 7 sessions amid a broader market sell-off. However, it has rebounded in the last 2 sessions.
Before this recent string of declines, the stock had surged 92 percent in September (till Sept 19), making the jump since July at 252 percent.
Vinyl Chemicals is a small-cap specialty chemicals manufacturer, with a market capitalization of ₹1,229 crore and caters to various industries such as textile, paints, and adhesive sectors. It is engaged in selling and supplying goods, products and materials, such as chemicals. The Company is trading mainly in Vinyl Acetate Monomer (VAM).
The surge in the stock can be explained by its robust results in the June quarter. The net profit of the firm jumped 74 percent YoY to ₹11 crore versus ₹6.3 crore in the year-ago period. Meanwhile, its profit surged 108 percent YoY to ₹315.75 crore in Q1FY23 from ₹152 crore in Q1FY22.
The company has also more than doubled its revenue to ₹867.53 crores in FY22 from 405.52 crores in FY21, while its net income rose over 200 percent on a YoY basis to ₹34.84 crores in the same period. The company has been growing its net income at a yearly rate of 31.98 percent over the last 5 years, comfortably beating the industry’s average growth of 18.1 percent.
Despite being a small cap, the management has an aggressive dividend policy which is also one of the attractions for investors. Since, FY19, the company has maintained its payout ratio of over 0.5.
Further, foreign investors have also been showing an interest in the company. FIIs have raised their stake to 0.42 percent, as of June 2022, from nil a year ago.
But it is important to note that small caps are high beta stocks and have considerably higher risks than largecaps and midcaps, this means higher rewards as well when performing well. It can provide a huge opportunity for high-risk investors but are not suitable for risk-averse investors.
Disclaimer: This story is for educational purposes only. Please speak to an investment advisor before making any investment decisions.