Multibagger! KPI Green Energy zooms over 24400% in 4 years; should you buy the stock?

In the last 3 years as well, the stock has given exceptional returns, rallying 11007 percent from ₹16.5 in May 2021. Meanwhile, in the last 1 year, it has soared 468 percent and it surged 87.5 percent in 2024 YTD.

This year so far, the scrip has given positive returns in 4 of the 5 months to date. The stock is up 1.5 percent in May following a 19 percent surge in April. However, it fell 12.5 percent in March. Meanwhile, it was positive in the first two months of this year, gaining 43.2 percent in February and 24.2 percent in January 2024.

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However, it is important to note that the stock is currently trading under ASM LT: Stage 1

What is ASM?

ASM LT Stage 1 refers to a regulatory measure used by stock exchanges to monitor and manage trading activities. Here’s a breakdown of the term:

ASM: Additional Surveillance Measure

LT: Long Term

Stage 1: The first level or stage of monitoring

ASM LT Stage 1 specifically refers to the initial stage of long-term additional surveillance measures imposed by the stock exchange. These measures are put in place to ensure market integrity and to safeguard the interests of investors. Stocks that are placed under ASM are subject to enhanced scrutiny due to factors like unusual price movements, volatility, or other concerns that may pose risks to investors.

Typical measures under ASM LT Stage 1

When a stock is placed under ASM LT Stage 1, the following measures may be implemented:

Increased Margins: Higher margins may be required for trading the stock.

Trade-to-Trade Settlement: All trades must be settled on a trade-to-trade basis, meaning no intraday trading is allowed.

Price Band Changes: There may be tighter price bands to limit the daily price movement of the stock.

Read here: Small stocks are racing ahead, but beware the risks

About the firm

KPI Green Energy Limited generates and supplies solar power under the Solarism brand name in India. It develops, builds, owns, operates, and maintains solar power plants as an independent power producer and captive power producer; and sells land parcels to third parties. The company was formerly known as K.P.I. Global Infrastructure Limited and changed its name to KPI Green Energy Limited in April 2022. KPI Green Energy Limited was incorporated in 2008 and is based in Surat, India.

Earnings

In the March quarter (Q4FY24), KPI Green Energy reported a multifold rise in its consolidated net profit at ₹25.8 crore versus ₹8.66 crore in the year-ago period. However, on a sequential basis, the profit fell from ₹40.77 crore in the December 2023 quarter.

Its revenue for the quarter under review also rose 76 percent to ₹167.94 crore as against ₹95.36 in the year-ago period. However, on a QoQ basis, the revenue declined 39 percent from ₹275.18 in the December quarter.

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Stock split and raising of funds

Last week on May 23, the company informed the stock exchanges that the company board has approved the “Sub-division/Split of existing equity shares of the Company from One equity share having face value of Rs. 10/- (Rupees Ten only) each, fully paid-up into 2 (Two) equity shares having face value of Rs. 5/- (Rupees five only) each fully paid-up.”

The stock split is to enhance the liquidity of the company’s equity shares and encourage the participation of small investors by making it more affordable, said the firm.

The KPI Green Energy board also recently approved the raising of funds through the issuance of equity shares or any other equity-linked securities of the company or other securities convertible into or exchangeable for equity shares by way of qualified institutions placements (QIP).

KPI Green Energy intends to raise funds in one or more tranches for an aggregate amount up to ₹1,000 crore at such price or prices as may be permissible under applicable law, subject to necessary approval.

Read here: ₹1.58 to ₹55: Penny stock turns multibagger. Rises 3400% in four years

Brokerage view

ICICI Direct highlights several strengths of KPI Green, including its strong quarterly growth in recent results, efforts in reducing debt, and the company’s ability to generate net cash. Notably, KPI Green has shown an improvement in net cash flow over the past two years, indicating a positive trend in its financial health, it added.

Meanwhile, its weaknesses, as per the brokerage are –

– MFs decreased their shareholding last quarter

– High Promoter Pledge

Investing in shares of small companies with low market capitalisation offers significant potential for substantial gains due to their lower stock prices. However, this investment path comes with notable risks. These stocks often face limited liquidity, resulting in fewer transactions compared to larger companies. Additionally, they typically lack the rigorous financial reporting and oversight seen in bigger corporations, making them vulnerable to price manipulation and fraudulent activities.

Read here: Multibagger Stock: Alphalogic Techsys surges over 3600% in 3 years, up 271% this year so far

Given their constrained liquidity and reduced oversight, small-cap stocks often exhibit increased volatility, heightening risks for investors. Therefore, thorough research and careful risk management strategies are essential to navigate the uncertainties associated with these stocks and mitigate potential losses.

Disclaimer: This story is for educational purposes only. Please speak to an investment advisor before making any investment decisions.

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Published: 27 May 2024, 05:40 PM IST