This multibagger stock soared 345% in less than 5 months, gained over 600% in a year; should you invest?

This recent surge has also led to the stock soaring 738 percent from its 52-week low of ₹22.06, hit on June 26, 2023.

This year so far, the scrip has given positive returns in all 5 months till date. The stock has risen 12.5 percent in May, extending gains for the fifth straight month. Meanwhile, it jumped almost 48 percent in April, 43 percent in March, 60 percent in February and almost 17 percent in January 2024.

In the long term as well, the stock has performed splendidly, rising over 1229 percent in 3 years (from ₹13.91 in April 2021) and over 826 percent in the last 5 years (from ₹19.95 in April 2019). However, it is important to note that the stock is currently trading under ESM: Stage 2

What is ESM?

The Enhanced Surveillance Measure (ESM) is a framework established by the National Stock Exchange (NSE) in India to improve monitoring and oversight of listed companies, aiming to protect investors and maintain market integrity.

In Stage I, trading is settled on a trade-for-trade basis with a price band of 5 percent or 2 percent.

In Stage II, trading occurs on all trading days through periodic call auctions with trade-for-trade settlement and a 2 percent price band. Previously, trading under this stage was limited to once a week.

About the firm

Tinna Trade Limited is a company based in New Delhi, India, that trades in agricultural and non-agricultural products. Its agricultural commodities portfolio includes pulses like yellow peas, green peas, chickpeas, lentils, kaspa peas, and toor; grains such as wheat, maize, millet, barley, corn, and sorghum; and oil seeds like rapeseed and soybean. The company also deals in edible oils and protein meals, including soybean meal, rapeseed meal, dorb, guar churi, guar korma, and sunflower meal or pellets. Additionally, Tinna Trade Limited trades in steel abrasives such as steel shots, steel cut wire shots, steel wire scrap or bead wire, and steel grit. Founded in 2009, the company operates as a subsidiary of Tinna Rubber and Infrastructure Limited.

Earnings

In the December quarter, Tinna Trade reported no net profit/loss as against a net loss of ₹0.15 crore during the same quarter last year. Meanwhile, its sales declined 39.99 percent to ₹45.92 crore in the quarter under review versus ₹76.52 crore during the corresponding quarter last year.

Brokerage view

According to ICICI Direct, Tinna Trade displays several positive indicators. It shows strong momentum as the stock price is above its short-, medium-, and long-term moving averages. Additionally, the stock reached a new 52-week high today, signaling robust performance. Moreover, the book value per share has been improving over the last two years, suggesting a strengthening financial position. These factors suggest that the stock is positioned for potential continued success in the market.

Meanwhile, its weaknesses, as per the brokerage, are:

– Red Flag: High interest payments compared to earnings.

– Promoter holding decreased by more than -2 percent QoQ.

– Declining profits every quarter for the past 2 quarters.

Investing in shares of small companies with low market capitalisation can offer the potential for significant gains due to their low price, but there are important risks to consider. These stocks often have limited liquidity, which can lead to fewer transactions compared to larger stocks. Additionally, these speculative investments lack the stringent financial reporting and oversight of larger companies, making them susceptible to price manipulation and fraud.

As a result, these stocks tend to exhibit high volatility, which increases the risks for investors. Conducting thorough research and implementing effective risk management strategies is crucial for navigating the uncertainties of such stocks and minimising 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: 09 May 2024, 03:05 PM IST