Rs 114 to Rs 973: This defence stock turned into a multibagger in three years; time to book profit?

Shares of Premier Explosives Ltd have turned into a multibagger in the last three years. The multibagger defence stock, which closed at Rs 114.3 on July 17, 2020 hit an all-time high of Rs 972.90 today, delivering 751% returns during the period. An amount of Rs 1 lakh invested in the Premier Explosives stock three years ago would have turned into Rs 8.51 lakh today. In comparison, Sensex has risen 79.75 per cent during the period. The stock touched a record high of Rs 972.90 today, rising 9.41 per cent against the previous close of Rs 889.15 on BSE.

The stock, which hit an all-time high of Rs 889.15 on the back of stellar Q1 earnings in the previous session, extended gains today.

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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.  The earnings were announced on Wednesday. Subsequently, shares of Premier Explosives hit an upper circuit of 10% at Rs 889.15 on BSE in the previous session.

In the current session, the Premier Explosives stock opened higher at Rs 931.05 against the previous close of Rs 889.15. Premier Explosives shares have zoomed 175 percent in a year and risen 122 percent since the beginning of this year. In three years, the stock has climbed 722%.

Total 0.65 lakh shares changed hands amounting to a turnover of Rs 6.15 crore on BSE. Market cap of the firm crossed Rs 1000 crore for the first time to Rs 1006 crore. The stock hit a 52-week low of Rs 305.10 on July 28, 2022.

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In terms of technicals, the relative strength index (RSI) of Premier Explosives stands at 85.1, signaling the stock is strongly overbought. The stock has a beta of 0.7 in the last one year, indicating low volatility. 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.

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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Here’s a look at what analysts said on the rally in the stock.

Abhijeet from Tips2Trades said," Premier explosives stock price is very overbought yet bullish on the Daily charts with next resistance at 950. Investors should book profits as close below support of 775 could lead to 600 in the near term."

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said , "The stock has zoomed from  Rs 430 zone to touch the high of  Rs 973 level today with the indicators at highly overbought zone. Chances of some profit booking cannot be ruled out. The near-term support is visible near Rs 840 zone and for further rise would need a decisive breach above Rs 975 zone for next targets of Rs 1050-1080 levels."

Gaurav Bissa, VP, InCred Equities said, “Premier Explosives had a dream run since 2020 with constant formation of higher highs and higher lows. The stock witnessed a 1-year swing high breakout at Rs 530 levels with a strong weekly candle supported by lifetime high volumes. This also triggered a 6-year breakout which catapulted towards 950 levels. The stock has achieved the breakout targets, which implies it is prudent to book profits."

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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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