Ashish Kacholia's Top Pick in Q1 is this Microcap Engineering Stock

The investing world is always focused on what super investors like Warren Buffett or Ray Dalio have been buying or selling.

In India, investors like Ashish Kacholia, Radhakishan Damani, Dolly Khanna and the likes have aced their respective areas and their buy and sell activities are always kept under watch.

Earlier this week, Ashish Kacholia landed on one company to keep pushing his ambitions in the infrastructure sector.

Before this, he had partially found success in a B2B company supplying to the infra sector. Kacholia has now expanded his presence in the infra space choosing this stock.

Who is Ashish Kacholia?

When we talk about successful investors in India, it's impossible not to mention Ashish Kacholia.

Kacholia is known for identifying the best multibagger stocks. He is known as the 'Big Whale' of the Indian stock market.

Over the years, he has picked the best multibagger stocks by looking at the fastest-growing companies from the midcap and smallcap space.

He started his career with Prime Securities in 1993. In 2003, he started Hungama Digital Entertainment Company along with Rakesh Jhunjhunwala. He is also the proprietor of Lucky Securities.

Which Stock Did Ashish Kacholia Buy and Why?

The stock in question is BEW Engineering.

On 27 June 2024, Kacholia acquired 276,974 shares of BEW Engineering.

This is basically the allotment of equity shares that the ace investor must have applied in the preferential allotment, that the company issued. (issue price of Rs 1,540)

Before this, the ace investor had acquired 15,500 shares of the company at an average price of Rs 1,450 in September 2023.

The recent activity will be reflected in the company's shareholding pattern when it files for the June 2024 quarter.

While we do not know the exact reason why the investing guru decided to buy the counter, there are some explanations.

#1 Robust Financial Performance

The company recently posted strong results for the second half of FY24 with revenue coming in at Rs 1.2 billion (bn) as against Rs 1 bn in FY23.

Operating margins improved with EBITDA coming in 64.6% higher compared to last year.

While net profit came in at Rs 136 million, up 85.1% YoY.

In the year gone by, BEW Engineering also became net debt free by prepaying loans and it has guided for a strong order book in the coming quarter. This comes after the company witnessed a lot more orders than anticipated in the last two quarters.

For the current financial year (FY25), the company is expecting its order book to reach Rs 1.5 bn.

By focusing on reducing inventory cycles with the commencement of its new facility, it's targeting EBITDA margin of 20-22% in FY25.

The management has also guided for strong growth in exports, especially from the African region.

Additionally, the company is developing new products like continuous dryer and filtering system.

All these strong growth prospects add to the reasons why Kacholia has turned bullish on the company.

#2 Focus on Growth Sectors

The other reason why Kacholia may be bullish on the company is because of its focus on high growth segments.

The company primarily focuses on industries such as pharma, agrochemicals, and specialty chemicals as these players have been the winners for the business model of the company in all kinds of economic cycles.

It supplies quality equipment to customer for repeat orders at prices which are lower or at par than its competitors.

Its BEW brand is over 3 decades old and has customers like SRF and Atul from which it gets repeat orders.

Key Challenges and Opportunities

Right now, the company is sitting on a heavy order book and it's anticipating more orders. But one key concern is competition from established players like HLE Glasscoat and GMM Pfaudler.

Both these players have been established players in the industry for the past few decades.

There are multiple players in stainless steel and it's a highly competitive space.

Nevertheless, the company's investing a lot as part of its capex and it's already starting to show some positive inflow from its debottlenecking exercise. This helped the company achieve an additional 40-50% revenues in FY24.

How BEW Engineering Share Price has Performed Recently

In the past 5 days, BEW Engineering share price has rallied around 8%.

On the day it was reported that Kacholia has been granted shares as part of the Insider and SAST trades, shares jumped over 6%.

BEW Engineering has a 52-week high of Rs 1,935 touched on 16 February 2024 and a 52-week low of Rs 1,205 touched on 30 June 2023.

In the past 1 year, shares of the company have gained 23%.

About BEW Engineering

BEW Engineering is a private limited company that designs and manufactures a special range of filtration mixing and drying equipment.

These are specifically used in pharmaceuticals sterile applications, intermediate compounds fine chemicals, agro chemicals, pesticides, insecticides, dyes etc.

BEW Engineering was established in 2011 and has quickly become a leading provider of filtration, mixing, and drying equipment to the pharmaceutical and chemical industries.

For more details, see the BEW Engineering company fact sheet and quarterly results.

For a sector overview, read our engineering sector report.

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...