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  • Feb 12, 2022 - These Multibagger Stocks Surge up to 500% in 2022. What's Driving the Rally?

These Multibagger Stocks Surge up to 500% in 2022. What's Driving the Rally?

Feb 12, 2022

These Multibagger Stocks Surge up to 500% in 2022. Whats Driving the Rally?

After Indian share markets wrapped up a historic 2021, the year 2022 has started off on a cautious note with benchmarks Sensex and Nifty trading near the same levels they started with.

2021 was a year of record highs for Sensex and Nifty, the year of initial public offerings (IPO) when retail investors rushed to join the frenzy.

Although the IPO market is expected to be as rosy as 2021, the sentiment has soured globally amid geopolitical concerns, and concerns regarding Fed rate hike. This has made investors nervous.

But at a time when the market has turned weak, several stocks from the microcap and smallcap space have turned multibaggers since the start of the calendar year 2022.

You read that right. In just around 30 trading session, some of these stocks have rallied a massive 500%.

Let's take a look...

#1 KIFS Financial Services

The stock which commands the top position in multibagger stocks of 2022 list is non-banking financial company (NBFC) KIFS Financial Services.

Stock of the company has been on a continuous roll, gaining 5% each consecutive day starting 31 December 2021.

That's 30 consecutive sessions of 5% gains.

So far this year, it's up a massive 500%. The company's share price chart will surely make you wonder - what's driving this stock after a lull 2021?

chart

When BSE sought clarification on the sharp rise, here's what the company replied in an exchange filing last month:

  • The up and down movement of pricing at stock exchange is nothing related to the information or decision taken by the company. It seems purely a speculation at market trading, which has nothing related to the company or its promoters.

As you can see, there aren't any developments behind the sharp 500% rally, which has left market observers puzzled.

There's nothing to write home about on the company's financials front too, except increased sales and massive jump in free cash flow.

Financial Snapshot

(Rs m Standalone) FY17 FY18 FY19 FY20 FY21
Net Sales 84.9 60.5 59.0 156.0 210.4
Sales Growth (%) 19% -29% -3% 164% 35%
Net Profit 33.5 30.0 28.2 39.4 37.9
Profit Margin (%) 40% 50% 48% 25% 18%
Free Cash Flow 25.8 13.9 3.3 18.7 314.3
Source: Equitymaster

Even in weak markets, when benchmark indices Sensex and Nifty plunge, shares of KIFS Financial Services hit the upper circuit band.

What does the company do? It offers capital market products like margin trading, loan against shares (LAS) and funding primary market issues for the retail investors.

It's part of the Khandwala group and is a subsidiary of KIFS Commercial Private, a proprietary trading entity of the group.

The Khandwala group has an established presence of more than 30 years across various businesses including stock & commodities broking, depository services, PMS, housing finance loans, bullion trading, real estate as well as arbitrage trading.

While there's no definite reason attributed to this rally, it could be because of the company's performance in December 2021 quarter.

This week, the company came out with its quarterly results where it reported almost 2x rise in its net profit at Rs 12 m. This compared with last year's figure of Rs 4 m.

Sales too, saw a spike and jumped 228% to Rs 102 m compared with Rs 31 m reported in the year ago quarter.

To know more about the company, check out KIFS Financial's factsheet and latest quarterly results.

#2 Shanti Educational Initiatives

A similar rally as KIFS Financial is also seen in the stock of Shanti Educational Initiatives.

It's up 300% since the start of 2022, having hit consecutive upper circuits for the past 30 days.

The smallcap stock has surged from around Rs 95 to Rs 385 today, appreciating around 300% year-to-date (YTD).

chart

Shanti Educational Initiatives is engaged in the business of providing education services and activities.

For financial year ending March 2021, Shanti Educational's net profit saw a massive spike if compared with 2020 figures. Profit rose to Rs 21.3 m from a mere Rs 0.7 m in the year ago. That too when its sales took a blow.

Last month, the company declared its results for the quarter ended December 2021 where the company's topline saw a massive growth of 463% at Rs 10.1 bn as compared to Rs 1.8 bn last year.

But the growth in topline was not enough as the company ended up posting a loss of Rs 6.3 bn.

To know more, check out the company's financial factsheet and latest quarterly results.

#3 White Organic Retail

Next on our list we have a retailing company White Organic Retail.

It is engaged in trading of agricultural products including organic and other products. The company is the supplier of essential oils & aromatics and cereals in India.

It sells 230+ different products in a wide range of categories under its own brand - White Organics.

The company is positioned as a niche player focusing on organic products aimed at lifestyle and health conscious customer segment.

Last year, the company entered into strategic tie-ups with delivery chains like Zomato and Swiggy for distribution of their products.

There was a major corporate rejig last year when the company's promoters sold their entire 55% holdings to Suumaya Industries.

Shares of White Organic Retail have seen a massive up move since November last year. The market has rewarded the company's shareholders even as it reports declining profits and sales in the past two financial years.

But the company's quarterly performance is noteworthy. Sales and profitability both saw a surge post the corporate rejig the company underwent last year.

White Organic Retail Quarterly Performance

(Rs m Consolidated) Dec-21 Dec-20 Sep-21 YoY (%) QoQ (%)
Net Sales 607 165 54 269% 1,023%
Total Expenses 538 162 55 232% 878%
Operating Profit 70 6 - 974% -
Net Profit 52 5 4 977% 1,200%
Net Profit Margin 9% 3% 7% - -
Source: Equitymaster

No wonder the stock is on a roll since the start of the year. Since the lows of Rs 29 last year in April, the stock has gained over 2,400% and currently trades at Rs 793. On a YTD basis, the stock is up 200% already.

chart

To know more about the company, check out White Organic's financial factsheet and latest quarterly results.

#4 DB Realty

Up 175% since the start of 2022, shares of DB Realty look set to rally some more.

Why? The stock is partly in the news because of ace investor Rakesh Jhunjhunwala and his wife buying as many as 20 m warrants in the company.

The company has recently come out with its fund-raising plan where it attracted ace investor Rakesh Jhunjhunwala to pick some stake.

Even as Godrej Properties called off its planned investment in the Mumbai-based real estate developer, it attracted other ace investors including Rakesh Jhunjhunwala.

DB Realty on Monday this week informed that its board has approved to raise funds through the issue of 50 m warrants to non-promoter investors.

Out of this, the company will allot 10 m warrants each to Rakesh Jhunjhunwala's venture capital firm RARE Investments, Rekha Jhunjhunwala, Abhay Chandak, and Aditya Chandak respectively. These warrants are convertible into equivalent numbers of equity shares.

Market experts suggest that this is huge for DB Realty as the company has ample land parcel and ongoing projects in Mumbai.

The company will raise Rs 15.8 bn from this issue of warrants and become debt free by March 2022.

Here's what the company said in an exchange filing...

  • From a peak liability of Rs 41.4 bn, the company expects to be debt-free in the near term. The focus of the company going forward is to partner with established large real estate developers to unlock the value of its large real estate portfolio.

Note that Rakesh Jhunjhunwala has stayed put in this stock for more than nine years. Jhunjhunwala first picked up a stake in the company in October 2012 at Rs 90 per share.

While Jhunjhunwala's move might make you interested to invest in this company, you should know the company is currently saddled with debt and has a track record of posting consecutive losses.

Financial Snapshot

(Rs m Consolidated) FY17 FY18 FY19 FY20 FY21
Net Sales 2,884 2,880 4,732 2,864 1,338
Sales Growth (%) -21% 0% 64% -39% -53%
Net Loss (803) (2,843) (2,247) (4,350) (1,461)
Total Debt 15,493 17,342 20,950 21,910 25,012
Debt to Equity (x) 0.56 0.69 0.94 1.41 1.87
Source: Equitymaster

The company has also been accused of money laundering, and been under the scrutiny of the income tax department.

What's more, it has been accused of not paying lenders and has not seen any significant progress on its projects.

Is this all about to change? Only time will tell. On a YTD basis, the stock is up 175% while it has gained a massive 600% in the past one year.

chart

To know more, check out DB Realty's financial factsheet and latest quarterly results.

Which other stocks have delivered multibagger returns in 2022 already?

Apart from the above, here are the multibagger stocks of 2022.

Company Price on 31 Dec '21 Price on 11 Feb '22 Change (%) Marketcap
(Rs bn)
Vegetable Products 24.5 60.3 146% 6.6
Sadhana Nitro Chem 57.4 138.7 142% 27.1
IL&FS Engineering and Construction 7.1 17.2 142% 2.2
SPML Infra 27.6 57.2 107% 2.1
Ruttonsha International Rectifier 204.5 421.6 106% 2.9
Source: Equitymaster

The key to identify multibagger stocks...

As a retail investor, if you are looking for multibagger stocks in India, you should weigh in all the pros and cons before investing in any company.

The goal of an investor should be to look for a good investment and not necessarily a multibagger. This is because you need to have a thorough process for investing that meets all your criteria.

If you go in with the assumption that every stock you invest into will be a multibagger, you will be disappointed. It won't work out that way.

The future is uncertain. Your rationale for buying a stock may change. You will have to watch out for that. The idea should be to buy a good quality stock of a company, look out for a business that has a solid foundation, sound growth strategy, attractive valuations, ethical business practices, and exceptional management team.

As long as these factors are in place, you should remain invested for the long haul rather than being agitated by short term market volatility and price fluctuations.

Recently, Co-head of Research at Equitymaster Rahul Shah recorded a video showing how you can put together your next multibagger portfolio.

In the video, Rahul talks about a strategy and how it can lead to a multibagger portfolio.

Happy Investing!

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...

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