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2022's Best Performing Penny Stocks So Far...

Aug 1, 2022

2022s Best Performing Penny Stocks So Far

Editor's note: When people think about investing in the stock market or trading in the best intraday stocks for that matter, large corporations come to mind.

The largest companies in India like Reliance, Infosys, TCS among others will be their preferred choice. Or the most popular stocks like Yes Bank, Tata Power, etc.

Some also look for penny stocks that offer diversity to their portfolio.

As the stock market has started to recover, every friend or relative I am meeting these days is talking about their stock investing prowess.

I'm reminded of the period post the March 2020 crash when everyone joined the bandwagon and invested in the stock market and make a killing.

Everyone wants to know how to find the best multibagger stocks in 2022.

Before we lay out the process on how you can find the penny stocks to buy for the long term, let's take a look at the top performing penny stocks of 2022.

Earlier this year in March 2022, we wrote to you about these penny stocks which rallied up to 500% in just two months.

A lot has happened since then. Continue reading to know more about these penny stocks.

Fastest Growing Penny Stocks of 2022 So Far...

2021 was an amazing year for investors.

In 2021, we saw a sharp upsurge in midcaps, small caps, and notably penny stocks. Several penny stocks delivered eye popping gains.

2022 has been no different.

You are probably thinking that there's something wrong here. After all, 2022 could not have had a worse start.

Well, you are right, and wrong.

You see, indeed, 2022 has not been kind to investors.

But, our focus here is on penny stocks. And you could be excused for not believing that penny stocks have been on a roll in 2022.

We are just two months into 2022 and several penny stocks that we track have already surged 5x.

Let's take a look at 2022's best performing penny stocks so far.

Please note, we have considered only those stocks that were priced at less than Rs 100 at the start of 2022. We have further filtered out the companies which have a debt to equity ratio of less than 1 and a minimum of Rs 1 bn in sales.

This is done to eliminate illiquid stocks with very less volume and the ones which can be operator driven and/or are facing troubles on the fundamental front.

Do note that the below list includes even those stocks that are priced more than Rs 100 today due to appreciation in their stock price.

Here goes...

#1 Shankar Lal Rampal

Trading at Rs 80 at the start of this year, Shankar Lal Rampal has seen a spectacular one-way rally.

Shankar Lal Rampal currently trades at Rs 181.5 with a marketcap of Rs 3.9 bn. That's a gain of 126% so far in 2022.

chart

Shankar Lal Rampal Dye-Chem is mainly engaged in the chemicals sector and is a prominent trader, exporter, importer, and supplier of Sulphur Dyes, Paraffin Wax, Phosphoric Acid, Sodium Sulphide, Hydrogen Peroxide, Citric Acid Monohydrate, Phosphate Chemicals, and Refined Glycerine, in India.

Ever since the company's board approved the recommendation for issuance of bonus shares last year, the stock is on a roll. Shankar Lal Rampal has given 2 bonuses since November 2020.

It seems as if Mr. Market is factoring all the positives that went unnoticed.

Have a look at the table below which shows Shankar Lal's improved financial metrics.

Financial Snapshot

(Rs m, standalone) FY17 FY18 FY19 FY20 FY21
Gross Sales 291.9 751.6 1,758.7 1,326.1 1,775.8
Net Profit 1.1 9.7 15.0 27.0 76.3
Free Cash Flow (1.3) (209.3) (51.3) (77.8) 87.3
Debt to Equity (x) 0.3 0.63 0.83 0.38 0.25
Dividend per share (Rs) 0 0 0.25 0.1 0.1
Data Source: Ace Equity

Shankar Lal Rampal has consistently increased return on equity (ROE) in last 5 years.

The share price of the company continues to touch new 52-week high every day and it appears that the stock could gain some more, owing to the PLI scheme for chemical sector.

Recently, chemicals and fertilizers minister Mansukh Mandaviya said the ministry is planning to bring production linked incentive (PLI) scheme for the chemical sector to boost domestic production and exports.

As of December 2021, promoters of the company hold 73.55 stake in the company with no shares being pledged. And that's a good thing.

To know more, check out the latest shareholding pattern of Shankar Lal Rampal.

Update: Share price of Shankar Lal Rampal has come down from its highs in the past one month.

Still, it is one of the top performing stocks, which has surged from Rs 27 at the start of this year to Rs 134 at present.

#2 Garg Furnace

Over the past one year, shares of Garg Furnace have seen huge swings in both directions.

Take a look...

chart

At the start of this year, the stock was trading at Rs 17.55. Currently, it trades at Rs 32.95 logging in gains of 88% in 2022 so far.

Garg Furnace is engaged in the business of manufacturing alloy and non-alloy steel ingots, wire rods, wire round, MIG welding wire, casting of iron products and trading of iron, steel and textiles products.

Non alloy steel accounts for a large chunk of its revenues, around 60% to be precise.

While the company has a good track record of sales, its profitability has for long remained an issue.

Financial Highlights

(Rs m, standalone) FY17 FY18 FY19 FY20 FY21
Gross Sales 596.1 672.9 1,118.3 985.2 1,193.5
Net Profit (135.5) (1.3) 51.1 35.8 (47.1)
Debt to Equity (x) 17.05 17.17 4.14 0.7 0.92
Total Debt 746.6 732.0 387.3 92.6 77.7
Data Source: Ace Equity

In 2021, the company's profitability was affected due to increased supply and slowdown in auto sector and other steel consuming sectors.

Garg Furnace has reduced debt substantially over the past two years.

In 2020, the company's debts were declared as NPA by banks. What followed was the banks taking possession of assets of the company.

Despite concerns of auditors resigning and NPA issues, the stock has been on a roll in the first two months of 2022. Talk about risky bets!

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

Update: For financial year 2021-22, Garg Furnace reported a two-fold jump in its net profit to Rs 63.2 m as compared to previous year's loss of Rs 47.1 m.

This was due to increased sales which rose 49% YoY.

Garg Furnace is no exception to the recent market sell-off as shares of the company have come down from its recent highs.

#3 Gujarat Mineral and Development Corporation (GMDC)

Shares of state-owned mining player and smallcap company GMDC have been in focus ever since it took price hikes in the lignite division in January 2022.

The price hike is expected to improve GMDC's financials, which currently has 5 operational lignite mines.

GMDC in its fiscal 2021 annual report said that in the coming years, coal production in India is likely to receive a boost as the government plans to replace country's captive mining policy in coal and iron ore with an open bidding one.

As five mining leases are reserved by central government for GMDC, it will boost the lignite production, which will help in increasing revenues of the company.

Apart from the price hike, another factor supporting the stock is its turnaround results. GMDC's revenues stood at Rs 7.3 bn in October-December as against Rs 3.3 bn a quarter ago.

On a sequential basis, profit after tax jumped to Rs 1.5 bn from Rs 0.4 bn.

GMDC's financial performance reflects its robust infrastructure as the country's largest merchant seller of lignite. This is a validation of the company's collaborative approach to business transformation, Roopwant Singh, IAS, Managing Director, GMDC was quoted as saying.

After being stagnant for over five years, GMDC's mining volume has started showing improvement.

In 2022 so far, the stock has already gained 80% and looks set to rally some more.

chart

Since 2016, the miner has stayed debt free. It has an impeccable track record of paying dividends although the dividend growth rate has slowed in the past three years.

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

Update: One of the fastest growing companies of 2022, GMDC share price rose big time following a boom in commodities.

It made a top of Rs 228 in April 2022 but came crashing down to Rs 130 levels in the following months. At present, shares of the company trade at Rs 165.

The company's management has increased focus on how to boost volumes in the coming years and improve its non-lignite operations.

GMDC's board has declared dividend for financial year 2021-22 amounting to Rs 4.3 per share. GMDC's MD had expressed interest in rewarding shareholders by dividend payouts versus a buyback.

GMDC's performance for this year was exceptional. Revenues more than doubled while net profit soared to Rs 4,035 m.

#4 Mahalaxmi Rubtech

Mahalaxmi Rubtech is a textile manufacturing company and a part of the Mahalaxmi Group of Industries. It is engaged in the manufacturing and marketing of products of traditional textile and technical textile.

The group has been active in the manufacture & export of textiles, dyes, pigments, auxiliaries and synthetic rubber / PU-coated fabrics.

In its technical textiles division, the company produces rubber coated fabric, which is primarily used in offset printing machines. Over the last couple of years, the performance of this division has improved with increase in demand and better acceptance in the market, primarily in competition with the imported products.

Trading at around Rs 63 at the start of 2022, the stock has zoomed to Rs 126 at present...a gain of 77% in a little under two months.

chart

So what exactly triggered a sharp rally in the stock of Mahalaxmi Rubtech?

While we don't know the exact reasons, one can assume the stock has rallied due to two reasons...first is improvement in financials and the other reason being textile industry witnessing a major turnaround.

After a dry spell of 3 years, the industry is on the cusp of a major turnaround. Textile companies have clearer visibility of profits. They are responding to the China plus one strategy positively.

On top of this, the government has announced a PLI scheme with total outlay of Rs 106 bn to bolster India's textile manufacturing capabilities.

India's textile industry is set to experience high growth and Mahalaxmi Rubtech too seems to be enjoying the party.

To know more about the company, check out Mahalaxmi Rubtech's latest quarterly results.

Update: Mahalaxmi Rubtech currently trades at Rs 129 with a marketcap of Rs 1.4 bn.

Which other penny stocks have rallied the most in 2022 so far?

Apart from the above, here are other penny stocks which have gained the most in 2022.

Company Name Price as on 31-Dec '21 Price as on 30-July '22 Change (%)
Lords Chloro Alkali Ltd. 62.95 220.15 250%
Axita Cotton Ltd. 81 261.6 223%
Akshar Spintex Ltd. 37.45 110.9 196%
Northern Spirits Ltd. 27.05 70.75 162%
Gala Global Products Ltd. 30 78.25 161%
Source: Equitymaster

These were the stocks with debt to equity ratio of less than 1 and more than Rs 1 bn in revenues.

However, if we remove these criteria, here's how the list looks like.

Multibagger Penny Stocks of 2022

Company Name 31-Dec-21 30-Jul-22 Change (%)
Kaiser Corporation Ltd. 2.79 71.55 2465%
SEL Manufacturing Company Ltd. 37.65 803.15 2033%
S&T Corporation Ltd. 21.8 306.1 1304%
Gallops Enterprises Ltd. 4.56 60.25 1221%
Hemang Resources Ltd. 3.09 36.75 1089%
Sadhna Broadcast Ltd. 2 21.56 978%
Katare Spinning Mills Ltd. 42.2 415.85 885%
Shanti Educational Initiatives Ltd. 9.52 89.85 844%
Sejal Glass Ltd. 23.26 219.25 843%
Alliance Integrated Metaliks Ltd. 2.71 22.3 724%
Source: Equitymaster

If you check out the above stocks, you'll notice that many of them have been on a secular uptrend, hitting upper circuits every day.

The reason behind this is simple.

Many of these companies have limited number of outstanding shares, a huge chunk of which is owned by promoters. So the trading volume is less which makes them illiquid for retail investors to trade in.

Even if you do a normal Google search on what these companies are doing and why their shares have rallied to the moon, you'll find not much data. In other words, investor beware!

Since you're interested in multibagger penny stocks in India, do check out Equitymaster's powerful stock screener.

This tool has a separate screen which lists the multibagger penny stocks in India.

Looking for multibagger penny stocks in India for 2022?

You're not alone.

Since penny stocks offer a great opportunity to make money fast, this comes as no surprise that retail investors are jumping ship and loading up penny stocks.

But in the process to find the next multibagger penny stock, retail investors often end up taking a lot of risk.

Penny stocks are extremely volatile. They have the potential to deliver multibagger returns in a few months. But they can also crash is short order. Corrections of 80-90% are common in this space.

As long as the market is going up, these stocks reward investors with huge returns. But as soon as the market changes direction, these stocks crash.

Luckily for you, Rahul Shah, editor of Equitymaster's penny stock recommendation service Exponential Profits, has shared a very effective technique that zeroes in on the right penny stocks.

He recently recoded a video on YouTube filtering out the stocks with his technique. These stocks will minimise your downside and also promise a good upside.

Happy Penny Stock 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...

FAQs on Penny Stocks

1) What is a penny stock?

While there's no set definition for penny stocks in India, a stock that trades at less than Rs 100 per share and has a market capitalization of less than Rs 10 bn is known as a penny stock.

These stocks, in general, have poor liquidity in the market i.e. their trading volumes are low. It's common to see penny stocks trade less than a thousand shares a day.

You can see the list of Indian penny stocks and how they are performing here...

2) Should you invest in penny stocks?

Whether you invest in penny stocks depends entirely on your risk appetite in the stock market. Penny stocks are the most volatile and most illiquid of all the stocks the market.

These stocks are notorious for delivering multibagger returns in a few months only to come crashing down and give up all the gains within the next few weeks.

Hence, in the stock market, penny stocks belong to the category of, 'highest possible risk for the highest potential return'. This is the reality you must accept when investing in penny stocks.

3) How much should you invest in penny stocks?

Penny stocks are inherently riskier than bluechips or midcaps.

They present a huge growth potential. It is not unusual for a good penny stock to turn a multi bagger in a matter of months. But on the flipside, there is a high risk attached. It's common to see penny stocks plunge 80-90% when things turn sour.

That is why penny stocks are not suitable to those having a low risk profile.

Even if you have a high risk profile, we believe not more than 5% of one's stock portfolio be invested in penny stocks.

4) Which are the best penny stocks to buy in India?

You need a framework that enables you to zero in on the right penny stock at the right price but also help you avoid the big losers.

The best penny stocks in India would possess these qualities:

  • Strong balance sheet: Look for low debt, high cash balance, & a current ratio greater than 1 i.e. current assets greater than current liabilities.
  • High promoter holding: The higher the better. It shows the promoter has skin in the game. Promoters buying shares from the market is a good sign.

You can start you're search with Equitymaster's stock screener to find the best multibagger penny stocks. The screener allows you to screen stocks based on your own criteria.

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