Ace Investor Mukul Agrawal Adds Stake in this Multibagger Smallcap Stock

In my investing career so far, I've been fortunate enough to talk to hundreds of investors.

Some of them are average while a select few are the best at what they do. I'm actually fascinated by what separates the top 1% from the rest of the pack.

Is there a special investment strategy that they follow? Or do they have some kind of secret algorithm? Or is it just pure luck?

The only common answer that I get from the best of the best have almost always revolved around something to do with long-term thinking.

We at Equitymaster constantly try to learn as much as possible about the best long term capital allocators in the world.

More so, the buying and selling activities of the top investing gurus in India like Ashish Kacholia, Vijay Kedia, Sunil Singhania, and the likes.

One such interesting development that was reported this week was Mukul Agrawal buying stake in a multibagger smallcap stock.

Who is Mukul Agrawal?

Mukul Agrawal is a prominent investor in India, who is known for his microcap stocks and smallcap stock picks.

His style of investment involves a mix of offence and defence, with majority of time an offensive strategy after proper analysis and keeping two separate portfolios for investing and trading.

Which Multibagger Stock did Mukul Agrawal Buy and Why?

The stock in question is Gensol Engineering.

The latest shareholding pattern of Gensol Engineering shows that Agrawal holds 1.64% stake in the company as of September 2023. As of yesterday's closing, his holding of 200,000 shares is valued at Rs 162 million (m).

Listed companies have to report details of shareholders who own more than 1% stake in a company.

While we don't know why exactly he bought stake in the company, there are some explanations...

In the quarter gone by, the company has witnessed a slew of positive developments. In the month of August 2023, Gensol Engineering bagged a couple of solar EPC projects in Dubai.

The company announced its two turnkey solar EPC projects with the Dubai Government Workshop Warehouse, and the Dubai Police.

These are the company's first international orders in the Solar EPC space. The Dubai Government Workshop Warehouse project is slated for commissioning in November 2023, while the Dubai Police project is scheduled to go online next year in June.

These projects have a cumulative order value of a little over Rs 1 billion (bn).

In the same month, the company had also received a letter of intent from Odisha Renewable Energy Development Agency (OREDA) to provide 300 electric vehicles (EV) with fleet management service on an operating lease for five years. These orders were worth Rs 1.2 bn.

That was for August 2023. Coming to September, the company's arm Gensol EV Lease bagged an order worth Rs 750 million (m) for supplying more than 500 Tata Ace cargo EVs. These vehicles are expected to be deployed in the next six months.

In the same month, the company had also announced a big-bang acquisition of Scorpius Trackers for a total consideration of Rs 1.4 bn.

Scorpius Trackers now operates as a subsidiary under Gensol Engineering. It's engaged in the design, development, marketing, and servicing of single-axis trackers for solar power generation. This acquisition shows Gensol's commitment to better its solar EPC offerings.

Apart from growing order book and key-acquisitions, the company also declared healthy performance in the first quarter of FY24 with 47% growth in revenue.

What Next?

The company is currently in a sweet spot as it continues to get more orders, adding to its future revenue and profit visibility.

Last month, the company bagged an order for a little over Rs 3 bn from Maharashtra State Power Generation Company (Mahagenco).

It also declared bonus shares last month which have now made the shares more affordable after the bonus effect in the current stock price.

Apart from being an established player in the solar space, the company in recent years also took a leap of faith and established an EV manufacturing facility in Pune for the development and production of electric three-wheelers and four-wheelers.

It also started to offer comprehensive EV leasing solutions and is currently serving leading ride-hailing players with its buy-and-lease package of EV cars.

Sometime in April this year, the management said in an interview that they aim to roll out 10,000-12,000 electric cars in this financial year from the new manufacturing plant.

So Gensol has a lot of tailwinds working in its favour. However, you can't ignore the fact that Gensol is still a small solar EPC player and it faces stiff competition from several established players.

It's also trading at sky-high valuations. That's what happens when growth narratives are framed and validated by temporary momentum.

The challenge is when the wave of liquidity recedes. It remains to be seen how Gensol Engineering fares in the coming quarter. No doubt, it's betting on some high-growth businesses.

How Gensol Engineering Share Price has Performed Recently

In the past five days, shares of the company have fallen around 9%. While in the past one month, the stock price is up 20%.

In 2023 so far, shares of Gensol Engineering have rallied over 120%.

Gensol Engineering has a 52-week high of Rs 946 touched on 18 October 2023 and a 52-week low of Rs 265 touched on 14 March 2023.

Look at the table below to compare Gensol Engineering with its peers.

Comparative Analysis

Company	Gensol Eng	ARSS Infra	K&R Rail	KP Energy	Likhitha Infra
ROE (%)	11.9	0	13.4	40.7	27.2
ROCE (%)	19.4	0.6	9.5	44.9	37.2
Latest EPS (Rs)	6.6	-	3.3	22.1	15.9
TTM PE (x)	123.3	-	227.9	23.7	18.5
TTM Price to book (x)	10.1	-	18.7	8.1	4.4
Dividend yield (%)	0	0	0	0.1	0.5
Industry PE	39.5
Industry PB	4.3

Data Source: Ace Equity

About Gensol Engineering

Gensol Engineering is engaged in the business of Solar consulting & EPC.

The services include solar advisory, solar EPC, solar O&M & solar monitoring & analysis.

Gensol also provides dedicated consultancy services for EHV (extra high voltage) transmission lines.

To know more, check out Gensol Engineering's financial factsheet.

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...