It is said that share prices are slaves of earnings. A couple of multibagger companies, which have been buzzing on Dalal Street due to their superlative performance, have reported over 100 per cent growth in the second quarter of the ongoing financial year. The list includes players like Adani Enterprises and VIP Industries, among others.
With a rally of 2,457 per cent in 5 years, billionaire Gautam Adani-led Adani Enterprises on November 3 reported 117 per cent growth in net profit at Rs 460.94 crore in Q2FY23. The figure stood at Rs 212.41 crore in the corresponding quarter a year ago. On the other hand, the gross sales of the company grew by 189 per cent to Rs 3,8175.23.
Shares of Adani Enterprises traded at a price-to-earnings (P/E) of over 450 times on November 3. However, while sharing his views on Adani Group, Vinit Bolinjkar, Head of Research, Ventura Securities said, “People don’t understand valuations, as they look for P/E only. One should do DCF calculation because these businesses are long-term cash flow businesses. These companies are in a continuous capex-oriented cycle. So, this is what is being missed by the market. The ongoing growth trend will sustain.”
Other big gainers
JK Paper is next on the list. Shares of the company have advanced 231 per cent in the past five years. The company recently reported 174 per cent YoY growth in net profit on a 74 per cent YoY rise in gross sales for the quarter ended September 30, 2022.
VIP Industries (up 161 per cent in 5 years), GHCL (up 147 per cent) and Lakshmi Machine (up 121 per cent) stood among other significant gainers in the list. All of these companies reported over 100 per cent YoY growth in Q2FY23.
Analysts are largely bullish on VIP Industries, as they believe that the luggage major would be a key beneficiary of increased movement of leisure and business tourists, both domestically and internationally.
ICICI Securities said strong manufacturing capabilities in Bangladesh (for soft luggage) and India gives VIP an edge over its peers who depend mainly on imports. The brokerage further added that stabilising raw material prices and increasing proportion of in-house manufacturing are seen as translating into better margins. ICICI Securities has set a target price of Rs 850 for VIP Industries, showing an upside of over 15 per cent from the current market price.
Sunidhi Securities is positive on GHCL Ltd with a target price of Rs 792. Shares of the company traded around Rs 634 in the morning trade on November 4.
“GHCL delivered strong numbers in Q2FY23, led by better realisation in the soda ash business which was well supported by capacity addition. Management expects near-term challenges to persist in the textile business and better performance should start reflecting from H1FY24. Despite short-term pressure on the textile business and pricing concern on soda ash we continue to remain positive on GHCL’s soda ash business in the long run and their ability to generate strong cash flow from it,” Sunidhi Securities said while upgrading the target price to Rs 792 (from Rs 788).
(Note: Complete financial results of India Inc are yet to be announced)
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