This multibagger stock is Dolly Khanna’s new bet
3 min read 02 May 2022, 10:38 AM ISTShares of this refinery company hit upper circuit after ace investor Dolly Khanna bought 1 m shares.
PremiumYou must be wondering what made the refinery stock, Chennai Petroleum Corporation (CPCL), hit the upper circuit limit of 10% twice in two days.
Well, the reasons are simple… …
Chennai Petroleum posted strong financial results on 28 April 2022.
Adding fuel to the flame, ace investor Dolly Khanna bought 1 m shares via open market purchase on the NSE on Thursday, 28 April 2022. This gives her nearly 0.7% stake worth ₹263 m through.
As per the bulk deal data, Khanna purchased the shares at the price of ₹263.15. Though, the seller’s name was not immediately clear.
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.
Why did Dolly Khanna Invest in Chennai Petroleum?
While we can’t know for sure why the star investor bought into it, there are some reasons that we can guess...
For the March 2022 quarter, the company reported a four-fold jump in its bottom line at ₹9.9 bn against ₹2.3 bn reported in the same quarter previous year.
During the same quarter, net sales jumped 88% year-on-year (YoY) to ₹164.1 bn from ₹87.4 bn in previous year’s quarter.
The company’s EPS increased to ₹68.8 in March 2022 from ₹15.6 in March 2021.
These are undoubtedly solid results. For more details, check out the latest quarterly results of Chennai Petroleum.
We all know the oil and gas industry has been heavily impacted by the Covid pandemic and the escalating Russia-Ukraine war.
Despite this, according to the Indian Energy outlook report by International Energy Agency (IEA), demand for crude oil in India is expected to increase from 242 MMT in 2019 to 411 MMT by 2040.
While the demand will be fuelled by improving living conditions, the population is also expected to increase by 0.27 bn.
In line with this belief, the company’s 2021 annual report stated,
The expected demand for more crude oil will provide an opportunity to invest in new refining facilities and requires huge investment in the future.
In order to meet the expected growing energy needs in India, especially in the State of Tamilnadu and in other states, CPCL is planning to set up a 9.0 MMTPA refinery at Nagapattinam in Cauvery Basin in Tamilnadu.
Another factor here is foreign investors.
Foreign institutional investors (FIIs) have been increasing their stake in the company for last three quarters.
While all these reasons are compelling, do remember not to plunge into a stock just because a market guru has bought a stake.
Investing is not that simple!
How the stock of CPCL has performed recently
CPCL share price opened 3.9% higher on Friday. As the session progressed, shares got locked in upper circuit limit of 10% consecutively for the second trading session.
Over the past one year, they have rallied over 140%.
In the past one month, the stock has given multibagger returns by surging 107%.
About the company
CPCL is a subsidiary of the state-run Indian Oil Corporation which holds 51.9% stake in the company.
The company was formed as a joint venture between the Government of India (GOI), AMOCO, and National Iranian Oil Company (NIOC) in 1965.
Operating in the downstream petroleum sector, CPCL produces an array of value-added petroleum products. The company has two refineries.
Located in North Chennai, the Manali Refinery has a capacity of 10.5 m metric tonne per annum (MTPA).
CPCL's second refinery is located at Cauvery Basin at Nagapattinam and has a capacity of 1 m MTPA. To know more about the company, check out CPCL’s financial fact sheet.
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
