Dolly Khanna Adds 1% Stake in These 2 Smallcap Multibagger Stocks that Rallied 350% in a Year

Just like software engineers dreaming of joining top tech companies like Google or Microsoft, investors often look up to market legends like Rakesh Jhunjhunwala, Radhakishan Damani, Ashish Kacholia, among others.

These super investors have built their wealth by spotting trends early, understanding the intricacies of the Indian economy, and making strategic moves that yield impressive returns.

Their success stories inspire countless investors who seek to replicate their winning strategies.

Today, we'll dive into the recent moves made by one of these market maestros...

Chennai-based investor Dolly Khanna's name has appeared in the shareholders list of not one, but TWO multibagger stocks!

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 Multibagger Stocks did Dolly Khanna Buy and Why?

The stocks in focus are Pondy Oxides and POCL Enterprises.

Towards the end of this week on Saturday, both these companies filed their shareholding for the quarter ended September 2024.

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

As can be seen from the above image, she added more than 1% stake in both these companies during the July-September 2024 quarter. Prior to this, her name was missing from the shareholders list.

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 in these multibagger stocks, here are a few factors that could explain this decision...

# Pondy Oxides & Chemicals

Pondy Oxides & Chemicals manufactures metal oxides and plastic additives. The company produces zinc oxide, lead sub oxide, litharge red lead, and liquid stabilizers of polyvinyl chloride (PVC).

Through a subsidiary, Pondy manufactures epoxy oil stabilisers and paint driers. Pondy Oxides and Chemicals is a leading secondary lead smelter in India.

These products are provided to companies like those that make batteries, chemicals, and PVC extruded and moulded products.

Interestingly, this is not Khanna's first encounter with Pondy Oxides. She had initially bought a 3.6% stake or 211,461 equity shares in the chemical manufacturing company in the March 2022 quarter but sold it a year later as the stock had run up.

Now once again, Khanna has reiterated her faith in the company by adding significant exposure.

One possible factor that explains her bullish rationale could be the recycling megatrend. You see, Pondy Oxides has a three-decade-long existence in the metal recycling industry. Most of the leading and premium original equipment manufacturers (OEMs) give repeat orders to the company, which gives it an advantage.

The company also has a well-diversified supplier and procurement base, with over 270 suppliers and procurement from over 90 countries.

Another added plus is Pondy's financials. For the first quarter of FY25, the company reported blockbuster earnings marked by significant growth across key financial metrics.

The revenue from operations surged by 37% YoY, driven by increased production, sales and higher realisations in both lead and plastics segments.

This strong top-line growth translated into a robust 76% increase in EBITDA, with EBITDA margins expanding to a healthy 5% from 4% in the previous year.

A noteworthy achievement was the 216% jump in net profit, driven by improved operational efficiency and reduced finance costs.

Here's a table showing the financial snapshot from 2020-2024:

Financial Snapshot

Rs m, standalone	FY20	FY21	FY22	FY23	FY24
Net Sales	12,199	10,043	14,548	14,717	15,238
Growth (%)	16%	-18%	45%	1%	4%
Operating Profit	397	276	820	841	776
OPM (%)	3%	3%	6%	6%	5%
Net Profit	163	108	482	492	395
Net Margin (%)	1%	1%	3%	3%	3%
ROE (%)	11.6	6.9	26.1	21.3	13.4
ROCE (%)	13.3	7.5	23.5	20.8	16.2
Dividend (Rs)	0.8	0.6	1.3	2.5	2.5
Debt to Equity (x)	0.4	0.9	0.5	0.6	0.3

Source: Equitymaster

Going forward, Pondy Oxide plans to introduce new recycling verticals in lithium-ion and e-waste, to keep contributing to the recycling industry.

Additionally, it plans to introduce new segments, organically or inorganically, such as plastics (in-house and industrial), e-waste, lithium-ion recycling, rubber, oil, glass, paper, and value-added products.

The company's focus on capacity expansion is evident in the ongoing construction of a new facility in Thervoykandigai, Tamil Nadu.

This will increase lead capacity from 132,000 MTPA to 204,000 MTPA in two phases. This strategic investment will be funded through internal accruals and proceeds from preferential issue.

Here's a table comparing Pondy Oxides with its listed peers -

Comparative Analysis

Company	Pondy Oxides	Bhagyanagar	Gravita	Hindustan Copper	Ram Ratna Wires
ROE (%)	10.6	26.8	33.9	13.5	15.1
ROCE (%)	14.2	20.9	28.2	18.1	18.9
Latest EPS (Rs)	19.3	2.9	36.9	3.7	12.9
TTM PE (x)	54.9	36.6	68.2	87.2	52.3
TTM Price to book (x)	7.1	1.8	19.2	13.1	6.9
Dividend yield (%)	0.2	0	0	0.3	1
Industry PE	21.3
Industry PB	3.8

Data Source: Equitymaster

In the past one year, Pondy Oxides share price has rallied 359%.

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

# POCL Enterprises

Moving on to POCL Enterprises...

The company manufactures and trades various metals, chemicals and their oxides.

It's a recycling company which also manufactures nonferrous metals such as lead and zinc.

POCL operates five factories with a total capacity of 57,345 MT.

So, what explains Dolly Khanna's rationale for buying a significant stake in the company?

One possible factor could be India's battery ecosystem picking pace along with the auto sector. The products which POCL makes are largely used in the battery manufacturing industry and have been contributing more than 60-65% of its total revenue for the past couple of years.

The company is in the process of adding capacity in its smelting facility, which is expected to add to its growth in the coming quarters.

Another possible factor that could have helped Dolly Khanna make her decision could have been the blockbuster earnings put forward by the company.

In the first quarter of FY25, the company put up a good show, with revenues rising over 75% while profit doubled from Rs 3.1 crore to Rs 6.3 crore in June 2024.

This was followed by an even better Q2. For the first half of FY25, the company saw its revenue shoot up by 42% while profit after tax spiked 188% YoY.

In the investor presentation, the company mentioned that capex of Rs 50 crore is complete in the first half of FY25 and it's also on track with geographical expansion.

Here's a table showing the historical financials:

Financial Snapshot

Rs m, standalone	FY20	FY21	FY22	FY23	FY24
Net Sales	3,469	3,189	4,978	8,744	11,204
Growth (%)	-24%	-8%	56%	76%	28%
Operating Profit	76	99	124	296	398
OPM (%)	2%	3%	2%	3%	4%
Net Profit	-6	14	34	129	177
Net Margin (%)	0%	0%	1%	1%	2%
ROE (%)	-1.8	4.2	9.1	28.6	29.6
ROCE (%)	5.1	7.2	8.7	21	24.2
Dividend (Rs)	0	0	0	2	2.5
Debt to Equity (x)	2.2	2.4	2.2	1.8	1.5

Data Source: Equitymaster

The company's lead segment remains the largest, with production reaching over 46,000 metric tons in H1FY25.

It's phase 1 expansion of the 36,000 MTPA lead capacity is expected to be operational by January 2025.

During the quarter, the company acquired a firm called Harsha Exito to support its future expansion plans.

Just last year, POCL was trading at a PE multiple of 12x, which has currently shot up to 50x!

Here's a table comparing POCL with its peers -

Comparative Analysis

Company	POCL Enterprises	Rajnandini Metal	Sunlite Recycling	Hindustan Zinc	Nile
ROE (%)	29.6	26.9	75.3	55.3	14.7
ROCE (%)	24.2	45.7	31.4	45.9	19.6
Latest EPS (Rs)	38.3	0.3	8.2	20.7	118.1
TTM PE (x)	22.1	29.4	20.3	24.6	20.9
TTM Price to book (x)	6.3	4.9	3.6	28.1	3.1
Dividend yield (%)	0.3	1	0	2.6	0.1
Industry PE	29.4
Industry PB	4.1

Data Source: Equitymaster

In the past 1 year, shares of the company have rallied 330%.

To know more, check out POCL's financial factsheet.

In Conclusion

Both these stocks are expected to see some action in the coming week, as investors take note of Dolly Khanna's activity and try to replicate her transactions.

Pondy Oxides share price fell 5% on Friday last week to settle at Rs 1,061. The stock could rebound to Rs 1,114 (5% circuit band) on Monday when the market open.

In case of POCL, the share price gained 2% on Friday to settle at Rs 846 per share. It has an upper price band of 2%, so the stock could see another 2% gain on Monday and touch 863.

This uptrend could even continue for a few days, given both these stocks are in strong momentum.

So there you go...we've shared all the facts and given reading and analysis of the whole situation. Now it is up to you to come up with your own estimates and numbers on how these companies could perform going forward.

Whatever you do, please do not base your decision on emotions or sentiments or what the other investors think.

Have a proper, independent rationale irrespective of whether it turns out to be right or wrong. This way, you will develop a sound framework which would hold you in good stead over the long term.

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...