Dolly Khanna Raises Stake in this Smallcap Fertilizer Firm

The Indian stock market has been on an upward trajectory recently, smashing one record after another. Consequently, investors are on the lookout for stocks that offer both profitability and are available at bargain prices.

Everyone loves a good bargain, but the real challenge lies in finding these stocks. Consequently, many investors turn to the portfolios of renowned investment experts who have a proven track record of outperforming the market and a talent for identifying undervalued stocks that can potentially yield significant returns.

As a result, every move these investing gurus make, including their decisions to buy or sell stakes in specific companies, garners significant market attention.

For investors seeking such news, there is noteworthy stock market news: Dolly Khanna, an ace investor, has acquired a substantial number of shares in a fertilizer company.

Who is Dolly Khanna?

Dolly Khanna is a Chennai-based investor known for picking lesser-known midcaps and smallcaps. She has been investing in stocks since 1996.

Dolly Khanna's portfolio, managed by her husband, Rajiv Khanna, is usually inclined towards more conventional stocks in manufacturing, textile, chemical, and sugar stocks.

Which stock did Dolly Khanna bet on and why?

According to the latest shareholding pattern of Mangalore Chemicals & Fertilizer, Dolly Khanna added 0.07% more exposure to the company in the June 2023 quarter.

He now holds a 1.27% stake in the company or 1.5 m shares of the total equity, against 1.2% or 1.4 m shares in the March 2023 quarter.

She initially bought a 1.71% stake in the company in March 2021.

Here's how Dolly Khanna's holding in Mangalore Chemicals & Fertilizers has varied since March 2021.

Quarter Ending	No of Shares	stake (%)
Mar-21	2,022,610	1.71
Jun-21	1,778,610	1.50
Sep-21	1,688,896	1.43
Dec-21	1,716,896	1.45
Mar-22	1,963,104	1.66
Jun-22	1,724,990	1.46
Sep-22	1,623,990	1.37
Dec-22	1,465,990	1.24
Mar-23	1,422,990	1.20
Jun-23	1,509,990	1.27

Data Source: BSE

While we don't know why she has increased her stake in the company, here are some explanations.

#1 Bargain Buy

The fertilizer smallcaps stock is currently trading at a favourable price-to-earnings (PE) ratio of 9.5x, which is significantly lower than the industry average of 22.7x.

Additionally, the price-to-book value of the stock stands at 1.6, also lower than the industry average of 8.6x. This attractive valuation may be one of the reasons why Dolly Khanna, renowned for her expertise in selecting lesser-known midcaps and smallcaps, has shown interest in this particular stock.

Despite the challenging market conditions, this smallcap stock has shown promising performance in recent times.

In the past month alone, it has delivered an impressive return of 15.6%. So far, in 2023, the stock has already gained 24.3%. These significant returns highlight the potential upside and value that this stock may offer.

Considering the stock's compelling valuation and the positive returns it has generated, it is no wonder that Dolly Khanna has taken an interest in it.

#2 Progressive Financial Performance

One additional factor that could contribute to the interest in this stock is the company's impressive financial performance over the years.

Over three years, the company has achieved a noteworthy compound annual growth rate (CAGR) of 19.3% in revenue, indicating sustained growth in topline figures.

Furthermore, the company has demonstrated impressive progress in net profit, with a CAGR of 26.3% over the three years.

This growth can be attributed to the company's successful efforts in increasing sales of urea.

Financial Snapshot (2021-23)

Particulars	Mar-21	Mar-22	Mar-23
Revenue (Rs m)	21,440	28,960	36,420
Revenue Growth (%)	-	35.0	25.9
Net Profit (Rs m)	670	880	1,350
Net Profit Margin (%)	3.1	3.0	-

Data Source: Company's Investor Presentation FY 2023

However, for the financial year 2023, the company continued its positive trajectory. The revenue reported a significant year-on-year (YoY) rise of 25.8%, amounting to Rs 36.4 billion (bn). The net profit for the year also jumped to Rs 1.4 bn, up 53% YoY.

This growth in net profit was due to strategies and strong operational performance driven by increased sales of P&K fertilizer.

Strong growth prospect

Going ahead, the company's prospects are expected to be bolstered by recent government initiatives and market conditions.

The Cabinet Committee on Economic Affairs approved significant fertilizer schemes, including the PRANAM scheme, urea scheme, and organic manure scheme, with a total allocation of Rs 3.7 trillion.

These initiatives aim to enhance farmers' well-being, soil productivity, and food security while promoting balanced fertilizer use with bio-fertilizers.

Furthermore, the extension of the urea subsidy scheme until March 2025 ensures the continued availability of urea to farmers at an affordable price of Rs 242/45 kg bag, despite the higher actual cost.

The savings generated from this subsidy will be allocated towards implementing new technologies in the fertilizer sector.

How shares of Mangalore Chemicals & Fertilizers have performed recently

Over the last one month, the share price of Mangalore Chemicals & Fertilizers has increased 15.8%. In 2023 so far, the stock is trading higher by 25%.

While, in the past one year, shares are trading lower by 6%.

The company touched its 52-week high of Rs 131.8 on 17 October 2022 and its 52-week low of Rs 72.7 on 28 February 2023.

About Mangalore Chemicals & Fertilizers

Mangalore Chemicals & Fertilizers is a part of UB Group and was incorporated in 1966.

The company is engaged in the business of manufacturing ammonia, urea, di-ammonium phosphate and ammonium bicarbonate. The main product, urea, is marketed under the Mangala brand name.

The company has a production capacity of 691,000 MT of fertilizers and industrial chemicals.

MCF is committed to sustainable development. The company has a number of initiatives in place to reduce its environmental impact, such as using renewable energy sources and recycling water.

For more details, see the Mangalore Chemicals company fact sheet and quarterly results.

Since small-cap stocks interest you, here's a proven approach on investing in small-cap stocks.

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