Multibagger Mining Stock Declares 5 Bonus Shares for Every 1 Share Held

Smallcap stocks that have seen a sharp run up in the past year and have decent reserves in place, are rewarding shareholders with bonus shares.

Bonus shares are free shares that shareholders receive against shares they currently hold.

Last week, we wrote about Newgen Software and the company's decision to pay out bonus shares in the ratio of 1:1 (one bonus share for every one share held).

Adding to this list, a smallcap firm from the mining space, has decided to declare bonus shares in the ratio of 5:1.

The company is none other than Sandur Manganese & Iron Ores.

The company is involved in mining of low phosphorous manganese and iron ore in Karnataka. It is the flagship company of the Sandur group which was promoted by the former ruler of the princely state of Sandur.

Here are 3 things to know about Sandur Manganese bonus shares -

• Sandur Manganese announced bonus shares on 18 December 2023.
• The company will issue bonus shares in a ratio of 5:1. This means five bonus share of Rs 10 each for every one existing fully paid-up equity shares they own.
• The record date for the same is yet to be determined.
• This is the company's first ever issue of bonus shares.

The bonus equity shares will be issued out of the available free reserves as of September 2023.

The mining company has free reserves worth 19.6 bn, which will be utilised to issue the bonus shares.

Bonus issues increase a company's share capital and liquidity while decreasing the stock price.

They are distributed out of profit reserves, free reserves, or securities premiums.

In addition to this bonus issue, the company was also in news recently after its board approved a rights issue and a massive capex plan.

Massive Capex

Reportedly, the company's board has approved a rights issue worth Rs 180 million (m) and a massive capex plan of Rs 9.5 bn.

The rights entitlement ratio was fixed at 2 new shares for every 1 share held as of the record date.

Under this capex, the commodity company plans to enhance manganese ore production from 0.28 to 0.58 MTPA and iron ore output from 1.60 to 4.50 MTPA.

Once the production is ramped up, it will start focusing on downstream operations.

Earlier this year in June, the company commissioned hybrid renewable power plant of 42.9 MW through a SPV with Renew Power to cater to the increasing energy requirement.

The company's management has intended to get into hot metal production and downstream value-add products, with the aim of having the maximum possible integration in all business segments.

Further, with the mining megatrend just starting, Sandur Manganese has planned further expansion of its mining operations.

The metals and mining industry is ideally positioned to gain from several developments, such as the energy transition, infrastructure spending, cheap borrowing rates, and the global economic recovery.

Future industry growth and its contribution to GDP growth in a post-pandemic environment are expected to be largely driven by both increasing exports and domestic demand.

A Close Look at its Financials

In the past five years, the company's revenue and net profit have shot up as it diversified operations in the ferro alloys and coke & energy segments.

FY22 was its best year where it saw a multi-fold increase in profit.

Financial Snapshot

Rs m, standalone	FY19	FY20	FY21	FY22	FY23
Net Sales	7,022	5,916	7,466	22,487	21,258
Growth (%)	15%	-16%	26%	201%	-5%
Operating Profit	2,431	2,248	3,175	10,094	4,515
OPM (%)	35%	38%	43%	45%	21%
Net Profit	1,474	1,474	1,539	6,751	2,709
Net Margin (%)	21%	25%	21%	30%	13%
ROE (%)	23.9	19.1	16.8	50.9	15.1
ROCE (%)	37.4	21.1	22.4	57.4	18.9
Dividend (Rs)	7.0	7.0	10.0	5.0	5.0
Debt to Equity (x)	0.0	0.5	0.4	0.2	0.1

Data Source: Ace Equity

The company posted weak Q2 results owing to lower sales of iron ore.

However, the management is hopeful of better numbers for the remaining of FY24 as realisation trend for iron ore has started to show encouraging signs.

How Sandur Manganese Share Price has Performed Recently

Post the bonus shares announcement, shares of the company shot up over 8% to hit a high of Rs 2,800.

However, gains were erased as the session progressed and the stock is currently trading up by 3%.

In the past one month, the stock has rallied over 70% with over 20% gains coming in the past five trading sessions.

In the year gone by, the stock is up over 240%!

Sandur Manganese has a 52-week high of Rs 2,800 touched on 18 December 2023 and a 52-week low of Rs 695 touched on 23 December 2022.

Here's a table comparing it with peers -

Comparative Analysis

Company	Sandur Manganese	GMDC	20 Microns	MOIL
ROE (%)	15.1	23.1	14.4	11.4
ROCE (%)	18.9	31.5	19.5	15.3
Latest EPS (Rs)	104.2	31.7	12.3	13.2
TTM PE (x)	24.4	12.7	14.5	23.6
TTM Price to book (x)	3.5	2.2	2.1	2.7
Dividend yield (%)	0.2	2.8	0.4	1.2
Industry PE	13.5
Industry PB	5.8

Data Source: Ace Equity

To know more, check out its financial factsheet and its latest quarterly results.

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...