scorecardresearchWhy this auto stock turned multibagger in just 1 month

Why this auto stock turned multibagger in just 1 month

Updated: 10 Jun 2022, 12:21 PM IST
TL;DR.

Shares of Hindustan Motors have turned multibagger in just the last 1 month, rising over 100 percent on buzz regarding the comeback of the iconic Ambassador car with an all-new electric model.

Shares of Hindustan Motors have turned multibagger in just the last 1 month, rising over 100 percent on buzz regarding the comeback of the iconic Ambassador car with an all-new electric model.

Shares of Hindustan Motors have turned multibagger in just the last 1 month, rising over 100 percent on buzz regarding the comeback of the iconic Ambassador car with an all-new electric model.

Shares of Hindustan Motors have turned multibagger in just the last 1 month, rising over 100 percent on buzz regarding the comeback of the iconic Ambassador car with an all-new electric model.

The stock has risen from around 10.45, a month ago to currently trade at around 23, gaining as much as 121 percent in this period. In the last 1 year, the stock has risen around 180 percent as against a 4 percent rise in Indian markets.

Just in June 2022 till date, it has rallied 47 percent extending gains from its 34 percent rise in May.

The media reports of the iconic brand Ambassador making a comeback have led to this recent surge in its stock price.

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However, the stock exchange BSE had sought clarification from Hindustan Motors on May 30 regarding the significant movement in share price but the reply is still awaited from the company.

As per media reports, the iconic Ambassador car is likely to make a comeback on the Indian roads in a new electric avatar in the next two years. Talks are on for a joint venture with a European auto company focused on the electric vehicle (EV) space, reports stated, adding that a memorandum of understanding (MoU) has already been signed and due diligence is expected to start shortly and will take 2-3 months to conclude. Other reports also suggested that Hindustan Motors’ Contessa may also be re-launched in the domestic market.

Reports also stated that Bose did not rule out the possibility of the company picking up a stake in the CK Birla-owned Hindustan Motors (HM). Bose, however, said, currently, discussions were focused around a 51:49 joint venture where HM would have 51 percent. However, he clarified that the equity pattern will be discussed further.

For FY22, the company posted a net profit of 18.65 crore against 3.76 crore a year ago. However, it reported ‘Nil’ revenue from operation in FY22 against 1.17 crore in FY21. Meanwhile, the other income of the company stood at 14.58 crore in FY22 against 11.01 crore in FY21.

Experts believe that the stock has surged on the back of the initial media reports. However, they noted that it is still speculation and there is no confirmation regarding the re-launching the electric cars. In case the reports don't turn out to be true, the stock could witness a massive decline.

Since it is a small-cap company, it is important to note that such stocks are highly volatile and should only be preferred by high-risk investors. But currently, it is important to wait and watch instead of jumping in, noted analysts.

Among peers as well, it was the best performing auto stock in the past 1 month. While most auto firms did see an increase in their stock prices in the last 1 month on the back of a recovery in demand and sales numbers, however, it was limited to around 5-20 percent. TVS Motor rose 20 percent in the last 1 month while M&M and Ashok Leyland gained 16 percent. Eichers Motors, Tata Motors and Maruti rose 12 percent, 8 percent and 5 percent, respectively.

Meanwhile, the Nifty Auto index rose 8 percent in the last 1 month.

Many analysts believe that the auto stocks may see gains in the coming months even as the volume may remain under pressure as the outlook for the rural economy is better because of the prospects of an above-normal monsoon. The sector has high hopes for the retail demand which is expected to remain strong as the normalcy returns after the pandemic.

Disclaimer: This story is for educational purposes only. Please speak to an investment advisor before making any investment decisions.

 

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First Published: 10 Jun 2022, 11:57 AM IST