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  • Jan 2, 2023 - 5 Penny Stocks that Rallied 1,000% in 2022. How are They Set Up for 2023?

5 Penny Stocks that Rallied 1,000% in 2022. How are They Set Up for 2023?

Jan 2, 2023

Penny Stocks that Rallied 1,000% in 2022. How are They Set Up for 2023?

A number of penny stocks in the market have rallied more than 1,000% in the year gone by.

As we move into a new year, it becomes important to examine whether the current market environment is conducive for investing in penny stocks.

Let's take a look at the penny stocks that rallied the most in 2022 and how they are set up for 2023.

We will also discuss the current market environment and how penny stocks could perform in 2023.

#1 Hemang Resources

Erstwhile BCC Finance, Hemang Resources is involved in the trading and distribution business. It's primarily engaged in coal trading where coal is imported from coalfields in Indonesia and South Africa and is sold to domestic companies.

Hemang Resources stands as the top performing penny stock of 2022, having surged a massive 1,929% between January 2022 and December 2022.

chart

From trading at less than Rs 4 at the start of 2022, the stock currently trades at Rs 66 having a 52-week high of Rs 81 touched on 31 October 2022.

A lot of this success is attributed to India's coal imports and the company's ability to reduce debt. Power stocks were rising in the first half of 2022. This was on the back of rising electricity demand triggered by intense heat waves. As a result, coal imports increased, and coal suppliers benefited.

The company's total income shot up to Rs 787 million (m) from Rs 136 m in financial year 2022.

Hemang Resources was once again profitable after posting losses in five consecutive years. It's debt to equity also came down to 0.18% in 2022.

Going forward, Hemang Resources has the chance to once again make up for past couple of years losses as prospects are looking strong at the moment.

A report states that coal consumption through 2023 will hit record levels as aftereffects of the Russia-Ukraine war play out.

#2 Kaiser Corporation

Next on the list is Kaiser Corporation.

The company is engaged in the business of printing of labels, articles of stationery, magazines, and cartons.

The company also has exposure to turnkey projects management services through its subsidiary.

Kaiser Corporation stands as the second best performing penny stock of 2022, having surged a massive 1,864% between January 2022 and December 2022.

chart

From trading at less than Rs 3 at the start of 2022, the stock currently trades at Rs 55 having a 52-week high of Rs 130.6 touched on 29 April 2022.

The stock has lost 58% since its peak in April, but still ranks as the second best performing penny stock of 2022.

There aren't any hard reasons to justify the stock's rally but it's somehow related to the financials. The company performed well in March 2022 quarter and was able to swing to profit.

The next two quarters, it went on to report lower revenues and was once again back to posting losses.

Investors should be very cautious with this stock as only Rs 2 million worth of shares are traded on a yearly average basis in the past one year.

#3 SEL Manufacturing

Next on the list is a textile company with a marketcap of Rs 19.6 billion (bn).

SEL Manufacturing is engaged in the business of manufacturing, processing, and trading of yarn, fabric, ready-made garments, and towels.

It's the third best performing penny stock of 2022, having surged 1,550% between January 2022 and December 2022.

chart

The company was a penny stock when it started out in January 2022, but it currently trades at Rs 621.

The rally witnessed is nothing short of exceptional, but it should raise a lot of questions.

The company's financial performance has remained volatile over the year, with losses being reported in most years.

Even on a quarterly basis, it's the same story. SEL Manufacturing has reported losses for the past six consecutive quarters.

The company was put under the Insolvency Resolution Process (IBC) between April 2018 and March 2021.

Latest shareholding data shows that promoters of the company hold 75.2% of the total equity while 23.5% is held by financial institutions. This leaves very thin volumes for retail individuals, 1.2% or 392,403 shares to be precise. So, this is a classic example of a penny stock rallying on low free float.

Going forward, prospects look good for the textile sector and the company could see some legitimate tailwinds working in its favor.

At present, the textile sector is in doldrums as majority of the players export their products to US and European markets. With a recession and global slowdown looming, demand has been hit.

In 2023 however, textile companies are poised to make a comeback. With input cotton prices on a decline, the textile sector could get back sooner than you can probably anticipate.

#4 Ashnisha Industries

Fourth on the list is a trading and distribution company - Ashnisha Industries.

The company is engaged in the business of trading of various steel products and trading of goods.

Shares of the company surged 1,549% in 2022, with most of the gains coming in the last three months.

chart

From trading at less than a rupee in January 2022, the stock currently trades at Rs 16.

The rally can be attributed to two reasons, a stock split and decent financial performance.

The company underwent stock split in June 2022, adding more liquidity to the stock.

On the financial performance, Ashnisha Industries was once again back to reporting profits after two years. This time around, the profits came even when revenues were lower.

The company's quarterly results also show a positive trend for the past four quarters. Before this, there were a string of losses for four quarters.

To know more, check out Ashnisha Industries financial factsheet and its latest quarterly results.

#5 Alliance Integrated Metaliks

Fifth on the list is Alliance Integrated Metaliks.

The company manufactures structural metal products and parts of metal structures by fabrication and supply of related heavy steel structures and equipment.

Shares of the company surged 1,362% in 2022.

chart

Again, it's pretty hard to explain what factors were responsible for this rally.

For starters, the company has reported a string of 31 quarterly losses starting March 2015.

On a yearly basis too, the company has reported losses in previous eight financial years. Interestingly, the losses reduced to the lowest levels in 2022. But that still doesn't explain such a massive rally.

In the past two quarters, FIIs have shown a liking for the company. They now hold 2.9% of the total equity.

To know more, check out the latest shareholding pattern of Alliance Integrated.

Which other penny stocks rallied over 1,000% in 2022?

Apart from the above, here are the top performing penny stocks of 2022.

Penny stocks that rallied the most in 2022

Company CMP (Rs) Change (%)
IFL Enterprises Ltd. 141.1 1162%
SG Finserve Ltd. 361.8 1088%
RMC Switchgears Ltd. 265.5 1039%
Sejal Glass Ltd. 251.1 980%
KBS India Ltd. 102.7 978%
Sonal Adhesives Ltd. 99.1 960%
S&T Corporation Ltd. 45.5 942%
Beekay Niryat Ltd. 76.2 928%
Standard Capital Markets Ltd. 20.8 883%
Deep Diamond India Ltd. 124 775%
Data Source: Ace Equity

What next for penny stocks in 2023?

Here's what Rahul Shah, editor of penny stock recommendation service Exponential Profits at Equitymaster, has to say about the outlook for penny stocks in 2023:

  • The Sensex currently trades at a PE of 23.7x as I write this.

    This makes it not very expensive but not very cheap either. Thus, a good idea would be to take say 50% exposure right now to buy almost debt free penny stocks with stable earnings profile, available at single digit PE multiple or at a price less than the book value per share of the company.

    It's all about keeping things simple and sticking to the discipline of adjusting your penny stock exposure based on the broader market valuations. Trust me, this is more than enough to earn good long term returns from penny stocks.

In case you need more help to identify such stocks, you can watch the below video where Rahul has shared more details.

Happy penny stock investing.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Yash Vora

Yash Vora is a financial writer with the Microcap Millionaires team at Equitymaster. He has followed the stock markets right from his early college days. So, Yash has a keen eye for the big market movers. His clear and crisp writeups offer sharp insights on market moving stocks, fund flows, economic data and IPOs. When not looking at stocks, Yash loves a game of table tennis or chess.


FAQs

Which are the top multibagger penny stocks in India right now?

As per Equitymaster's Stock Screener, here is a list of the top multibagger penny stocks in India right now...

These companies have been ranked as per the returns they have given shareholders in the last 3 years.

Remember, it's not easy to identify future multibagger stocks, but if you do it carefully and with due diligence, you can find high growth companies which can turn out to become future multibaggers.

What are penny stocks?

Penny stocks are shares of listed companies priced below Rs 100. In the US market, these stocks trade for less than a dollar i.e. for pennies. Hence the name.

Penny stocks have the potential for above-average returns. However, they are extremely risky. Therefore, investing in them requires care and caution.

How should you go about investing in penny stocks?

Penny stocks are usually issued by new or very small companies. These companies often don't have a proven track record, which is why their shares are sold for so little.

Larger, more established companies may also have stocks trading under Rs 100 when they are facing financial trouble or approaching bankruptcy.

Since they carry a high amount of risk, one must have a proper strategy in place.

Check out our framework for investing in penny stocks. This strategy is the easiest one to make money from penny stocks.

How to find multibagger penny stocks?

Investing in penny stocks can be a risky affair. They are extremely volatile and have low liquidity. Moreover, there is very little information available about them. This makes it difficult to analyse them.

However, fundamentally strong penny stocks have the potential to give multibagger returns. In fact, there are several large-cap stocks that were penny stocks once.

You can start you're search with Equitymaster's stock screener to find the best multibagger penny stocks.

Specifically, look for companies with strong balance sheet, high promoter holding, high quality of the business, strong cash flows and cheap valuations.

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