Dolly Khanna's Top Pick in Q2 is this Multibagger Broking Stock Under Rs 250

Earlier this week, we wrote to you about ace investor's Ashish Kacholia's top stock pick for the quarter ended September 2024.

As companies started to file their latest shareholding data, it was revealed that Kacholia invested Rs 600 million to acquire a 2.52% stake in Jyoti Structures.

Adding to the list of companies that filed their Q2 shareholding, Dolly Khanna's name appeared in the list of shareholders of one of the stock broking firms in India.

Who is Dolly Khanna?

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

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

We recently wrote about Dolly Khanna's portfolio and the top 5 stocks she holds under Rs 250.

Which Stock did Dolly Khanna Buy and Why?

The stock in focus is Emkay Global Financial Services.

Towards the end of this week on Friday, the company filed its shareholding for the quarter ended September 2024.

Interestingly, Dolly Khanna's name appeared in the shareholders list who hold above 1% stake.

Every quarter, companies have to give a list of shareholders who own more than 1% stake in the company.

While we don't know the exact reasons for her investment, here are a few factors that could explain this decision...

#1 Strong Sectoral Outlook

The sentiment has turned extremely bullish for the companies involved in broking and related services.

This is primarily owing to low penetration of financial products, increased financialisation of savings, technology development and an evolved regulatory regime.

India has recently experienced a robust increase in demat accounts, reflecting a growing interest in retail equity participation. The total demats accounts surged at a compounded annual growth rate (CAGR) of approximately 33.3% from fiscal year 2019 to fiscal year 2024, rising from 35.9 million accounts to 151.4 million accounts.

Going forward, as there's more awareness among retail investors and companies fight to capture market share by reducing brokerage costs, stock broking firms are expected to enjoy rich valuations.

Emkay Global is in the business of providing capital market services.

Currently, along with its wholly owned subsidiaries, it offers services in equity broking, commodity broking, currency broking, lending, depository participant, wealth/portfolio management services, distribution of financial products and investment banking operations.

#2 Strong Momentum

Emkay Global share price also has some technical factors working in its favor. The stock price is trading at its highest level in over 5 years.

As they say in momentum investing, working with the 'momentum' by buying stocks in an uptrend and then selling them when they start to lose steam, works wonders.

The momentum is even strong if the underlying stock commands strong fundamentals like low debt-to-equity ratio, high profitability, liquidity, etc.

#3 Robust Fundamentals

In its first quarter earnings for FY25, Emkay reported a 58% YoY growth in revenues while net profit shot up by a whopping 3,375% compared to the year ago period.

During the quarter, Emkay served as the merchant banker for the IPO of Awfis Space Solutions, while it was also the advisor for the preferential issue of Man Industries.

In the past 5 years, the company's sales and profit have compounded at a growth rate of 14% and 29% respectively.

Financial Snapshot

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	1,336	1,618	2,712	2,030	2,825
Growth (%)	-8%	21%	68%	-25%	39%
Operating Profit	-22	280	568	260	571
OPM (%)	-2%	17%	21%	13%	20%
Net Profit	-126	111	338	141	324
Net Margin (%)	-9%	7%	12%	7%	11%
ROE (%)	-7.6	7.6	19.8	7.1	14.1
ROCE (%)	-5.7	12.1	25.4	7.7	19
Dividend (Rs)	0	1	1.3	1	1.5
Debt to Equity (x)	0.1	0.1	0.1	0.1	0.1

Data Source: Equitymaster

Going forward, Emkay is expected to benefit from the positive market environment, which aids the deal pipeline.

To know more, check out Emkay's detailed financial factsheet.

How Emkay Global Stock Price has Performed Recently

In the past one month, share price of Emkay Global has risen 32%.

In 2024 so far, Emkay Global has rallied 76%.

Emkay Global has a 52-week high of Rs 251 touched on 7 October 2024 and a 52-week low of Rs 87 touched on 26 October 2023.

In the past 1 year, the stock price has rallied 152%.

Here's a table comparing Emkay Global with its peers -

Comparative Analysis

Company	Emkay Global	5Paisa	Arihant Capital	Dhani Services	Monarch Networth
ROE (%)	14.1	11.1	24.4	-10.3	44.2
ROCE (%)	18.9	13.4	28.9	-5.4	51.8
Latest EPS (Rs)	18.5	19.2	7.5	-5.9	18.6
TTM PE (x)	13.2	28.1	14.9	0	22.1
TTM Price to book (x)	2.5	3.1	3.4	1.2	4.5
Dividend yield (%)	0.6	0	0.5	0	0.2
Industry PE	23.1
Industry PB	4.9

Data Source: Equitymaster

In Conclusion

Following the buy and sell activities of the big names in the market and then making your own decision based on your personal risk appetite is a good strategy. Many investors do just that and earn market beating returns.

While this approach might seem appealing, it has several potential drawbacks.

A replicating investor may end up buying a stock at a much higher price than the successful investor, as the latter may have bought the stock much earlier when it was undervalued.

Also, their risk tolerance level, size of investment and investment horizon is often quite different from that of a retail investor.

They may be able to take bigger risks and hold on to investments for a longer period of time.

Hence, blindly following their moves without considering one's own risk profile and investment goals can be risky.

While it might be tempting to follow the investment moves of successful investors, it is crucial to conduct thorough research and analysis before making any investment decision.

Investors should focus on investing in fundamentally strong companies that align with their individual goals and risk tolerance level, rather than blindly following these gurus.

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...