Multibagger Stock To Buy? Smallcap Pharma Stock That Saw 900% Jump In Net Profits

It's always hard to spot a multibagger in the early stages, on fears that things could fade away fast. However, smallcap pharma stock, Samrat Pharmachem could be a potential multibagger stock to buy, if the company continues to notch-up impressive quarterly numbers. Having said that it is an extremely small cap and there is always a risk with smallcap stocks, as they tend to be more volatile. So, investors need to be more careful.

Superb jump of nearly 900% jump in net profits

If you see the net profits of Samrat Pharmachem, it has surged from Rs 95.36 lakhs in June 2021 to Rs 936 lakhs in June 2022. A surge in the net profits is not accompanied by a surge in other income, but, largely comes from a huge spike in revenues. Revenue from operations grew from 4723 lakhs in June 2021 to Rs 8650 lakhs in the June 2022 quarter. So largely, the net profits of the company have come from a growth in revenues. The jump in net profits was to the tune of 888%.

What does Samrat Pharmachem do?

The company began with a strong presence in Iodine. Today, it is a well-integrated pharma company, and exports its finished products across the globe. Its customers include premium multi-national companies with multiple facilities approved by leading regulatory agencies such as USFDA, EU GMP, UK MHRA, South Africa-MCC, Health Canada, WHO and Brazil ANVISA, Samrat Pharmachem makes use of in-house R&D along with a team of technical experts in the field of Iodine to offer widest range of derivatives to its customers.

Extremely cheap on valuations

It is unlikely that the valuations of the stock will remain low for long. For the quarter ending June 30, 2022, the company reported an EPS of Rs 30, if the same momentum continues in the next few quarters, we are looking at a full year EPS of Rs 120 or so for FY 2022-23. The stock at Rs 450 is discounted just 4 times, leaving it with a potential to be a multibagger stock. The company declared its results on Friday and one has to see whether there would be a reaction to the stock today. The stock has hit a 52-week high of Rs 578 and a 52-week low of Rs 170 on the BSE. The shares of the company are not listed on the NSE.

Be a little careful

Investors are advised some caution as they invest in the markets, given the way stocks have rallied in the last few weeks. It is advisable not to invest large sums as there is an inherent risk to the markets of a sharp downside. In fact, at every opportunity it would be advisable to book some profits, as the price to earnings multiples have turned more expensive and slightly higher for the Nifty. 

Disclaimer

Investing in stocks is risky and investors must exercise all possible caution. Do not use the article as a basis for your complete investment decision. Greynium Information, and the author are not responsible for losses, based on a decision taken after reading this article.