Rs 108 to Rs 1,000: This defence stock turned into a multibagger in three years; when is the right time to buy?

Shares of Premier Explosives Ltd delivered multibagger returns in the last three years. The multibagger defence stock, which closed at Rs 108.55 on July 31, 2020 hit a high of Rs 1002.80 today, delivering 823% returns during the period. An amount of Rs 1 lakh invested in the Premier Explosives stock three years ago would have turned into Rs 9.23 lakh today. In comparison, Sensex has risen 77.70 per cent during the period. The stock touched a record high of Rs 1026.40 on August 1, rising 9.41 per cent  and a 52 week low of Rs 318 on  August 4, 2022. The stock has gained 216% from its 52-week low.

Premier Explosives shares rose 1.53% intraday to Rs 1002.80 today against the previous close of Rs 987.65 on BSE. Earlier, the Premier Explosives stock opened higher at Rs 992.05 against the previous close of Rs 987.65 on BSE. Premier Explosives shares have zoomed 199 percent in a year and risen 139.21 percent since the beginning of this year.

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Total 5107 shares changed hands amounting to a turnover of Rs 50.83 lakh on BSE. Market cap of the firm rose to Rs 1078 crore.

In terms of technicals, the relative strength index (RSI) of Premier Explosives stands at 81.5, signaling the stock is strongly overbought. The stock has a beta of 0.7 in the last one year, indicating very low volatility during the period. Premier Explosives shares are trading higher than the 5 day, 10 day, 20 day but lower than the 50 day, 100 day and 200 day moving averages.

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The Q1 earnings were announced on July 19 during market hours. The defence firm’s June quarter profit rose six times on a year-on-year basis. Premier Explosives reported a profit of Rs 8.21crore in the June quarter against Rs 1.26 crore profit in the corresponding period of the previous fiscal.  Revenue in the last quarter rose to Rs 61.95 crore against Rs 51.77 crore in the June quarter of 2022. Earnings per share (EPS) climbed to Rs 7.64 in Q1 against Rs 2.17 in the June 2022 quarter.

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Three promoters held 41.33 per cent stake in the firm and 11,185 public shareholders owned 58.67 per cent or 63.07 lakh shares for the quarter ended June 2023. Of these, 10,547 resident individuals held 22.55 lakh shares or 20.97 % stake with capital up to Rs 2 lakh. 27 resident individuals held 23.99 lakh shares or 22.31% stake with capital up to Rs 2 lakh.

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Here’s a look at what analysts said on outlook of the defence stock.

Manoj Dalmia, CEO of Proficient Equities said, “Premier Explosives is a company specialising in industrial explosives and offering Operation & Maintenance services for organizations like ISRO and DRDO. As it aligns with the ‘Make in India’ defence policy, it aims to collaborate with OEMs to meet offset obligations. With an impressive order book of Rs 1,108 cr, equivalent to 5.5 times FY23 revenue, suggests the company is well positioned for growth. Recent FII engagement indicates potential inflows in the defense sector. Cautious investors may prefer to wait for price dips and observe sales growth trends, while risk-tolerant individuals could consider gradually accumulating smaller holdings, considering recent price movements.”

Aditya Gaggar, Director of Progressive Shares said, “From the technical perspective, Premier Explosives has doubled in a month from the levels of Rs 438 (128%) without any considerable pullback. This is majorly attributed to the recently received orders (the order inflow to date in FY24 stands at Rs 725cr, executable over the next 12-24 months and providing the revenue visibility going forward). However, at present, all the chart indicators are in an extremely overbought condition. Those investors who are already invested can hold on it while for fresh entry one definitely needs to wait, as the zone of Rs 870-890 will offer a good opportunity to enter.”

Abhijeet from Tips2Trades said, "Premier explosives stock price is very overbought on the daily charts with next resistance at Rs 1010. Investors should book profits as close below support of Rs 957 could lead to Rs 800 in the near term."

Premier Explosives Limited is primarily engaged in the manufacture of high energy materials and allied products for the defence, space, mining and infrastructure industries. The company's geographical segments include India and the Rest of the world. It is focused on developing and manufacturing solid propellants for rockets and strap-on motors for satellite launch vehicles.

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