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Top 5 multibagger penny stocks to watch out for in 2024

 Penny stocks can also be risky as there is often limited information available about these companies and their fundamentals.. (Mint) (MINT_PRINT)
Penny stocks can also be risky as there is often limited information available about these companies and their fundamentals.. (Mint) (MINT_PRINT)

Summary

  • A look at the top performing penny stocks of 2023 and how they are stacked for 2024.

Penny stocks can be appealing as they have the potential for significant gains with a relatively small investment. You could start out with just a few bucks and make a killing.

They can also be risky as there is often limited information available about these companies and their fundamentals.

Given how interest in stocks is at an all-time high, it won't be surprising if select penny stocks hit fresh highs.

With that in mind, let’s look at the top multibagger penny stocks of 2023 and how they are stacked up for 2024.

Please note, to filter out the low liquidity and illiquid penny stocks, we’ve put a criterion where these companies should have at least 2 billion in gross sales and more than 1 million in average traded value in the past one year.

The share price performance of the stocks mentioned below is calculated after taking their prices as on 1 January 2023 and 29 September 2023.

#1 Patel Engineering

First on the list of multibagger penny stocks is Patel Engineering.

The company is primarily engaged in the construction of dams, bridges, tunnels, roads, piling works, industrial structures, and other heavy civil engineering work in areas like hydro, irrigation & water supply, urban infrastructure, and transport.

It derives almost all revenues from its EPC business.

In 2023 so far, shares of the company have zoomed over 200%.

      Patel Engineering share price in 2023 so far

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As can be seen from the chart above, shares of the company started to see green shoots from June 2023, when it posted a strong financial performance and growth prospects looked even more promising.

In FY23, the company achieved a significant turnover of 42 billion (bn), a 24% YoY growth.

Additionally, the company's EBITDA grew by approximately 14-15% YoY. The net profit soared from 550 million (m) in 2022 to an impressive 1.5 bn in the financial year 2023.

Patel Engineering also reduced its debt from 53 bn to around 17 bn through strategic asset sales and settling arbitration awards. The company plans to reduce its debt by about 2 bn this year via further arbitration settlements.

 

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For the quarter ended June 2023, the company posted a 22.5% rise in net profit as revenues surged 24%.

The company had highlighted that future earnings could primarily be driven by hydropower and irrigation projects as they offer higher margins. The current optimism could be attributed to this reason.

Patel Engineering has won a slew of orders in the past few weeks and some of them are even from the irrigation segment.

In its investor presentation for Q1, the company said it has 49 ongoing projects worth over 200 bn. This number has already gone up as it has won major orders recently.

Going forward, these orders are expected to contribute significantly to revenue and profits.

Last year, the company completed a merger by absorbing 14 wholly owned subsidiaries with itself to combine business interests.

At the current price, the stock is trading at a PE multiple of 22x compared to its 5-year average of 10.7x.

Its price to book value stands at 1.4x compared to the 5-year average of 0.5x.

#2 Lloyds Engineering Works

Next on the list is Lloyds Engineering Works.

Erstwhile Lloyds Steels, the company is primarily engaged in the design, manufacturing, and commissioning of heavy equipment, machinery & systems for the hydrocarbon sector, steel plants, nuclear plant boilers, and turnkey projects.

It derives most of the revenue from the power segment.

In 2023 so far, shares of the company have gained over 165%.

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Shares of the company caught up momentum after it posted strong numbers for FY23.

The company saw a strong growth in its order book which multiplied revenue multifold to 3.1 bn compared to 500 million in FY22.

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The other reason behind the bullish sentiment could be increased orders from the defense sector. The company is eyeing orders from defense players which is expected to drive better margins.

It started receiving these orders after getting necessary approvals from authorities including the Industrial Boiler Regulatory Authority, SGS UK, Petroleum and Explosives Safety organization, among others.

As of June 2023, it had an order book of 8.2 bn.

In FY23, the company undertook a capacity expansion worth 400 million. In FY24, it plans to spend 500 million to double its capacity.

Since the capex cycle is strong across industries, the company could potentially see better margins as it has a diversified client base.

At the current price, the stock is trading at a PE multiple of 118x compared to its 5-year average of 57.7x.

Its price to book value stands at 18.7x compared to the 5-year average of 1.1x.

#3 Peninsula Land

Third on this list is Peninsula Land.

The company is engaged in the real estate development sector with a portfolio comprising commercial, residential, and retail developments.

It used to develop projects on former textile mill lands owned by the group, or in joint development with the landowners in Mumbai. But in recent years, this has changed as the company has started diversifying its operations by taking projects in Pune, Nashik, Lonavala, Bangalore and Goa.

In 2023 so far, shares of the company have gained over 135%.

         Peninsula Land share price in 2023 so far

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The primary reason behind the sharp re-rating is the company’s performance for FY23 and Q1FY24.

It turned profitable in FY23 and posted a profit of 1 bn as against a net loss of 1.1 bn in FY22. This was because revenues more than doubled to 10.4 bn.

This turnaround came on the back of the completion and delivery of its multiple projects.

Following a strong FY23, the company started FY24 on an even better note by posting stellar numbers for Q1FY24. Net profit surged over 4x to 604.6 million compared to 128.1 million reported in the same quarter last year.

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Going forward, the company is planning to provide possessions to over 1,000 homebuyers in the current financial year.

The company also aims to bring down debt, which is the primary cause of concern for real estate players. As of March 2023, its debt stood at 4.2 bn.

At the current price, the stock is trading at a PE multiple of 9.9x compared to its 5-year average of 6.5x.

#4 IRFC

Fourth on this list is IRFC.

The company is the financing arm of the Indian Railways. It is a Government of India Enterprise, under the Ministry of Railways (MoR).

IRFC's principal business is to borrow funds from the financial markets to finance the acquisition/creation of assets which are then leased out to the Indian Railways.

In 2023 so far, shares of IRFC have surged 136%.

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You would be aware thatrailway stocksare all hype these days and any news involving a big order book can take its stock price for a wild ride.

This is exactly what's happening with IRFC.

The Indian Railways' is reportedly planning to roll out a substantial 250 bn tender. Its objective is to secure a fleet of 60,000 wagons during the upcoming July to September 2023 quarter.

This is a major procurement order, expected to boost the revenue and profit of IRFC, which finances the purchase of railway assets.

The Railway Ministry is also aiming to manufacture trains to export to markets in Europe, South America and East Asia by 2025-26.

As per the Railway Ministry, by FY26, India plans to export standard-gauge Vande Bharat trains. The plan, if realised, will place India on par with eight countries that have the capability to manufacture trains with speeds of 180 kmph or more.

IRFC's strong balance sheet size with nil gross NPA, low overheads, and the Indian Railways' huge capex needs bode well for the company's growth prospects over the long term.

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Being the primary financier for Indian Railways, the company will continue to get significant business over the coming decade. Especially since Indian Railways plans to make huge investments in expansion and modernisation of the network.

The company is also planning to diversify its financing portfolio. This evolution will encompass new dimensions of railway projects, notably dedicated freight corridors, high-speed rail initiatives, and the development of smart railways.

Recently at the G20 summit, India, US, and Saudi Arabia announced plans to build an economic corridor that would link the Middle East with South Asia and eventually Europe.

This announcement suggests a strong railway and shipping connectivity network among the countries as it integrates railway routes.

Projects like these take decades to fully implement, so it can add a lot of value over the coming years for stocks involved.

At the current price, the stock is trading at a PE multiple of 16x compared to its 5-year average of 5.6x.

Its price to book value stands at 2.1x compared to the long-term average of 0.8x.

#5 Welspun Specialty Solutions

Last on the list is Welspun Specialty Solutions.

The company is engaged in the business of manufacturing alloy, stainless steel & its products such as seamless tubes & rolled products.

In 2023 so far, shares of the company have surged 119%.

         Welspun Specialty share price in 2023 so far

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In FY23, the company doubled its revenue and swung back to profit at the operating level.

It still posted a net loss for the year on the back of a one-time inventory write-off and because it undertook a heavy capex investment in FY23.

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Going forward, the company is expecting revenue and profit to get a boost from the recently commissioned capex. We can already see this happening as it posted good numbers for the first quarter of FY24.

It also has a strong order book position combined for India and the US operations. It recently forayed into the Philippines and the US markets.

Going by its latest business update, the prospects for the company surely look stronger than ever.

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At the current price, the stock is trading at a PE multiple of 352x.

Which other multibagger penny stocks should you watch out for in 2024?

Apart from the above, here are a few other multibagger penny stocks to keep an eye on –

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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

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