These Multibagger Stocks Surged up to 500% in 2022. What’s Driving the Rally?

2021 was a year of record highs for Sensex and Nifty, the year of initial public offerings (IPO) when retail investors rushed to join the frenzy.

Although the IPO market is expected to be as rosy as 2021, the sentiment has soured globally amid geopolitical concerns, and concerns regarding Fed rate hike. This has made investors nervous.

But at a time when the market has turned weak, several stocks from the microcap and smallcap space have turned multibaggers since the start of the calendar year 2022.

You read that right. In just around 30 trading session, some of these stocks have rallied a massive 500%. 

Let’s take a look…

 

#1 KIFS Financial Services

The stock which commands the top position in multibagger stocks of 2022 list is non-banking financial company (NBFC) KIFS Financial Services.

Stock of the company has been on a continuous roll, gaining 5% each consecutive day starting 31 December 2021.

That’s 30 consecutive sessions of 5% gains.

So far this year, it’s up a massive 500%. The company’s share price chart will surely make you wonder – what’s driving this stock after a lull 2021?

Massive Surge in KIFS Financial Services

 

When BSE sought clarification on the sharp rise, here’s what the company replied in an exchange filing last month:

The up and down movement of pricing at stock exchange is nothing related to the information or decision taken by the company. It seems purely a speculation at market trading, which has nothing related to the company or its promoters.

As you can see, there aren’t any developments behind the sharp 500% rally, which has left market observers puzzled.

There’s nothing to write home about on the company’s financials front too, except increased sales and massive jump in free cash flow.

Financial Snapshot

( ₹m Standalone)	FY17	FY18	FY19	FY20	FY21
Net Sales	84.9	60.5	59.0	156.0	210.4
Sales Growth (%)	19%	-29%	-3%	164%	35%
Net Profit	33.5	30.0	28.2	39.4	37.9
Profit Margin (%)	40%	50%	48%	25%	18%
Free Cash Flow	25.8	13.9	3.3	18.7	314.3

Source: Equitymaster

Even in weak markets, when benchmark indices Sensex and Nifty plunge, shares of KIFS Financial Services hit the upper circuit band.

What does the company do? It offers capital market products like margin trading, loan against shares (LAS) and funding primary market issues for the retail investors.

It’s part of the Khandwala group and is a subsidiary of KIFS Commercial Private, a proprietary trading entity of the group.

The Khandwala group has an established presence of more than 30 years across various businesses including stock & commodities broking, depository services, PMS, housing finance loans, bullion trading, real estate as well as arbitrage trading.

While there’s no definite reason attributed to this rally, it could be because of the company’s performance in December 2021 quarter.

This week, the company came out with its quarterly results where it reported almost 2x rise in its net profit at ₹12 m. This compared with last year’s figure of ₹4 m.

Sales too, saw a spike and jumped 228% to ₹102 m compared with ₹31 m reported in the year ago quarter.

#2 Shanti Educational Initiatives

A similar rally as KIFS Financial is also seen in the stock of Shanti Educational Initiatives.

It’s up 300% since the start of 2022, having hit consecutive upper circuits for the past 30 days.

The smallcap stock has surged from around  ₹95 to  ₹385 today, appreciating around 300% year-to-date (YTD).

Shanti Educational Initiatives is engaged in the business of providing education services and activities.

For financial year ending March 2021, Shanti Educational’s net profit saw a massive spike if compared with 2020 figures. Profit rose to ₹21.3 m from a mere ₹0.7 m in the year ago. That too when its sales took a blow.

Last month, the company declared its results for the quarter ended December 2021 where the company’s topline saw a massive growth of 463% at ₹10.1 bn as compared to ₹1.8 bn last year.

But the growth in topline was not enough as the company ended up posting a loss of ₹6.3 bn.

 

#3 White Organic Retail

Next on our list we have a retailing company White Organic Retail.

It is engaged in trading of agricultural products including organic and other products. The company is the supplier of essential oils & aromatics and cereals in India.

It sells 230+ different products in a wide range of categories under its own brand - White Organics.

The company is positioned as a niche player focusing on organic products aimed at lifestyle and health conscious customer segment.

Last year, the company entered into strategic tie-ups with delivery chains like Zomato and Swiggy for distribution of their products.

There was a major corporate rejig last year when the company’s promoters sold their entire 55% holdings to Suumaya Industries.

Shares of White Organic Retail have seen a massive up move since November last year. The market has rewarded the company’s shareholders even as it reports declining profits and sales in the past two financial years.

But the company’s quarterly performance is noteworthy. Sales and profitability both saw a surge post the corporate rejig the company underwent last year.

White Organic Retail Quarterly Performance

( ₹m Consolidated)	Dec-21	Dec-20	Sep-21	YoY (%)	QoQ (%)
Net Sales	607	165	54	269%	1023%
Total Expenses	538	162	55	232%	878%
Operating Profit	70	6	-	974%	-
Net Profit	52	5	4	977%	1200%
Net Profit Margin	9%	3%	7%	-	-

Source: Equitymaster

No wonder the stock is on a roll since the start of the year. Since the lows of ₹29 last year in April, the stock has gained over 2,400% and currently trades at ₹793. On a YTD basis, the stock is up 200% already.

24x in a Year

 

#4 DB Realty

Up 175% since the start of 2022, shares of DB Realty look set to rally some more.

Why? The stock is partly in the news because of ace investor Rakesh Jhunjhunwala and his wife buying as many as 20 m warrants in the company.

The company has recently come out with its fund-raising plan where it attracted ace investor Rakesh Jhunjhunwala to pick some stake.

Even as Godrej Properties called off its planned investment in the Mumbai-based real estate developer, it attracted other ace investors including Rakesh Jhunjhunwala.

DB Realty on Monday this week informed that its board has approved to raise funds through the issue of 50 m warrants to non-promoter investors.

Out of this, the company will allot 10 m warrants each to Rakesh Jhunjhunwala’s venture capital firm RARE Investments, Rekha Jhunjhunwala, Abhay Chandak, and Aditya Chandak respectively. These warrants are convertible into equivalent numbers of equity shares.

Market experts suggest that this is huge for DB Realty as the company has ample land parcel and ongoing projects in Mumbai.

The company will raise ₹15.8 bn from this issue of warrants and become debt free by March 2022.

Here’s what the company said in an exchange filing…

From a peak liability of ₹41.4 bn, the company expects to be debt-free in the near term. The focus of the company going forward is to partner with established large real estate developers to unlock the value of its large real estate portfolio.

Note that Rakesh Jhunjhunwala has stayed put in this stock for more than nine years. Jhunjhunwala first picked up a stake in the company in October 2012 at ₹90 per share.

While Jhunjhunwala’s move might make you interested to invest in this company, you should know the company is currently saddled with debt and has a track record of posting consecutive losses.

Financial Snapshot

( ₹m Consolidated)	FY17	FY18	FY19	FY20	FY21
Net Sales	2,884	2,880	4,732	2,864	1,338
Sales Growth (%)	-21%	0%	64%	-39%	-53%
Net Loss	(803)	(2,843)	(2,247)	(4,350)	(1,461)
Total Debt	15,493	17,342	20,950	21,910	25,012
Debt to Equity (x)	0.56	0.69	0.94	1.41	1.87

Source: Equitymaster

The company has also been accused of money laundering, and been under the scrutiny of the income tax department.

What’s more, it has been accused of not paying lenders and has not seen any significant progress on its projects.

Is this all about to change? Only time will tell. On a YTD basis, the stock is up 175% while it has gained a massive 600% in the past one year.

 

Data Source: Ace Equity

To know more, check out DB Realty’s financial factsheet.

 

Which other stocks have delivered multibagger returns in 2022 already?

Apart from the above, here are the multibagger stocks of 2022.

Company	Price on 31 Dec '21	Price on 11 Feb '22	Change (%)	Marketcap ( ₹bn)
Vegetable Products	24.5	60.3	146%	6.6
Sadhana Nitro Chem	57.4	138.7	142%	27.1
IL&FS Engineering and Construction	7.1	17.2	142%	2.2
SPML Infra	27.6	57.2	107%	2.1
Ruttonsha International Rectifier	204.5	421.6	106%	2.9

Source: Equitymaster

 

The key to identify multibagger stocks...

As a retail investor, if you are looking for multibagger stocks in India, you should weigh in all the pros and cons before investing in any company.

The goal of an investor should be to look for a good investment and not necessarily a multibagger. This is because you need to have a thorough process for investing that meets all your criteria.

If you go in with the assumption that every stock you invest into will be a multibagger, you will be disappointed. It won't work out that way.

The future is uncertain. Your rationale for buying a stock may change. You will have to watch out for that. The idea should be to buy a good quality stock of a company, look out for a business that has a solid foundation, sound growth strategy, attractive valuations, ethical business practices, and exceptional management team.

As long as these factors are in place, you should remain invested for the long haul rather than being agitated by short term market volatility and price fluctuations.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. 

This article is syndicated from Equitymaster.com