Up 800% in 2 years! The euphoria may not be over for this smallcap multibagger

NEW DELHI: Shares of Agarwal Industrial Corporation (AICL), an infrastructure ancillary for the transport and logistics segments, have been on a roll for a while now.

The stock has seen a meteoric rise of 832.69 per cent in the last two years, outperforming both benchmark and peers by a wide margin.

In the last year alone, this multibagger has added 142 per cent and analysts at Hem Securities have initiated coverage on the scrip with a 'Buy' rating. The brokerage has a target of Rs 705, an upside of 33 per cent from Monday's close of Rs 528.


The smallcap company posted a robust set of numbers in FY22, with with a sweet 77 per cent year-on-year jump in topline to Rs 1,598.24 crore, while the profit grew 48 per cent to Rs 105.76 crore in the same period. Its debt/equity ratio declined from 0.66 in FY21 to 0.50 in FY22, depicting strong financial health.

In the last five years, the company has increased its market share from 0.58 per cent to 1.23 per cent. Analysts believe with the government's focus on infrastructure, the company is well set to cater to opportunities present in the sector.

"The company has shown strong growth in volume over the last few years and has been able to command a strong market share. We expect the company to post a decent set of numbers in FY23, with a 20 per cent in topline at Rs 1,918 crore and solid growth of 26 per cent in bottomline around Rs 80 crore," Hem Securities said.

ACIL also has the largest market share of 28 per cent in Bitumen (a common binder used in road construction -- a residual product in petroleum refineries after higher fractions like gas, petrol, kerosene and diesel are removed). With highways expected to expand by 25,000 km in FY23, this will lead to an increase in the demand for road materials, thereby creating demand for Bitumen and more opportunities for the company.

"Prices of Bitumen have increased globally, while in India also they have risen every 10-12 days or fortnightly. Hence, the company can maintain its financial performance. We expect the company to grow at ~ 20-25 per cent in volume terms going forward," the brokerage report added.

AICL also has an edge over peers due to its fully integrated business model as it provides an end-to-end solution from material procurement from the international market to transport and logistics support under one roof, it noted.

INVESTMENT HIGHLIGHTS

• Increasing revenue every quarter for the past 2 quarters
• Annual net profits improving for last 2 years
• Market leader in Bitumen with a 28% share
• Strong portfolio of marine and vessels
• Profit-making company with High ROCE and Low PE
• Undervalued growth stock

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