Shankar Sharma Buys 365,000 Shares of this Multibagger Smallcap Stock

Everyone dreams of unearthing multibagger stocks in the market - those hidden gems that explode in value, multiplying your investment by several times.

Investors like Shankar Sharma, Rakesh Jhunjhunwala, and Mukul Agrawal inspire us with their success in finding these treasures.

The key to success lies in identifying these potential high-growth stocks before they take off. It's like having a sixth sense in the investment world. Since few possess this innate ability, many follow the strategies of successful investors.

In this instance, ace investor Shankar Sharma recently bought a stake in a small-cap stock that has already experienced impressive growth of 109% in the past year.

Here's why.

Who is Shankar Sharma?

Shankar Sharma is one of India's well-known investing gurus.

People look forward to his interviews as they are full of colourful metaphors, witty one-liners, and smart observations.

According to data provided by the exchanges, Sharma publicly holds 6 stocks with a net worth of over Rs 457 million (m).

Which Stock Did Shankar Sharma Buy and Why?

The stock in question is Bigbloc Construction.

Bigbloc Construction, incorporated on 17 June 2015 in Gujarat, manufactures building blocks and aerated autoclaved concrete (AAC) bricks.

Marketed as NXTBLOC, its AAC blocks are eco-friendly solutions in the construction sector.

The latest shareholding pattern of Bigbloc Construction shows that Shankar Sharma has added a 0.5% stake or 365,000 shares in the company as of the March 2024 quarter.

He purchased these shares at an average price of Rs 235, totalling an investment of Rs 85.7 m.

Notably, in the December 2023 quarter, his name was missing from the list of shareholders.

While we don't know why he added shares of Bigbloc Construction, there are some reasons that we can guess.

#1 Strong Expansion Drive

Shankar Sharma's decision to invest in this stock may be influenced by its robust expansion strategy.

The company, on 27 March 2024, announced investing around Rs 950 m in the mega expansion at Kapadvanj in Gujarat and Wada, Maharashtra.

The expansion projects are expected to be completed in the next 3-4 months.

Post expansion, the company's total capacities will increase from 8.3 lakh cubic meters to 13.7 lakh cubic meters per annum.

The company's manufacturing plants are located in Umargaon and Kapadvanj in Gujarat and Wada in Maharashtra.

In April 2023, Bigbloc Building Elements Pvt Ltd, a wholly owned subsidiary of BigBloc Construction, completed the first phase of the Wada Project in Palghar, Maharashtra by establishing the 2.5 lakhs cubic meters per annum capacity of the AAC block.

In December 2023, the company started the work for the second phase of the AAC blocks plant at Wada which is expected to be completed in the first quarter of the financial year 2024-25.

In the second phase, the company aims to double the production capacity of the Wada plant to 5 lakh cubic meters per annum of AAC blocks from the existing 2.5 lakh cubic meters per annum, investing around Rs 300 m.

At full capacity, the Wada plant is expected to generate annual revenues of Rs 2 bn per annum.

The company is eligible for a 60% subsidy from the state government for the Wada project.

#2 Promoter Buying

Another potential reason for Shankar Sharma's interest in the stock can be a strategic move by a member of the promoter group.

Madhu Narayan Saboo, in February 2024, acquired 105,000 equity shares of the company, sending a clear and confident message about Bigbloc's future potential.

This acquisition involved the purchase of 105,000 shares from the open market, leading to an increase in the total promoter group holding to 72.4%.

Beyond being a simple transaction, this move reflects the promoter's unwavering belief in the capabilities and future growth prospects of Bigbloc.

Additionally, during the quarter, foreign institutional investors (FIIs) also acquired a 0.1% stake in the company.

#3 Sound Financials

Another reason why Shankar Sharma may have purchased shares in the company is its consistent business growth between 2021 and 2023. While the sales have doubled the losses have turned into profits.

The company's revenue has grown steadily over the past three years, with a CAGR of 24.7%. This indicates a strong and expanding business.

Net profit has also increased over the period but at a greater pace than revenue of CAGR 129%. This is due to decrease in interest and admin expenses.

The net profit margin increased from 2.4% in FY21 to 15.1% in FY23, reflecting improved efficiency and cost management.

Financial Snapshot (2021-23)

(Rs m, Consolidated)	FY21	FY22	FY23
Revenue	1,030.00	1,752.00	2,001.00
Sales growth (%)	-	70.1	14.2
Net profit	25	161	301
Net profit margin (%)	2.4	9.2	15.1

Source: Equitymaster

Bigbloc maintains a healthy ROE (35.9%) and ROCE (32.1%), indicating efficient utilisation of funds and capital employed.

Further, For the December 2023 quarter, Bigbloc Construction demonstrated robust financial performance, with its top-line witnessing a substantial 24.1% surge to Rs 614.9 m compared to Rs 495.4 m a year ago, indicative of robust market demand.

The net profit for the quarter stood at Rs 86.6 m in December 2023, reflecting a 12.5% growth from Rs 77 m in the corresponding period last year.

Looking forward, Bigbloc Construction foresees achieving a sales growth of 20% to 25% in the financial year 2024, maintaining a robust EBITDA margin between 20% and 25%.

What Next?

The AAC block industry confronts challenges such as moderate entry barriers and a prevailing preference for traditional red bricks in India.

Nevertheless, the considerable potential for market conversion from red bricks to AAC blocks presents a noteworthy opportunity. Bigbloc is poised to leverage this transition, underpinned by its dedication to sustainability and an expanding market.

Strategically positioned, the company strives to attain leadership in India's AAC Block Space, targeting a substantial capacity increase to 13.8 lakh cubic meters per annum upon the successful completion of ongoing expansion projects.

This vision reflects the company's commitment to growth and sustainability and its aspiration to play a pivotal role in shaping the future of the construction industry in India.

How Shares of Bigbloc Construction have Performed Recently

The Bigbloc Construction stock rose around 11% in the past five days. Over a month, the share price has gained by 21%.

Bigbloc Construction share price touched its 52-week high price of Rs 284.4 on 7 May 2024. Its 52-week low was Rs 129.4 touched on 8 May 2023.

The company is currently trading at a PB (price to book value) multiple of 33.9 times.

About Bigbloc Construction

Bigbloc Construction Limited is an India-based company, engaged in manufacturing building blocks and aerated autoclaved concrete (AAC) bricks.

The company's AAC blocks are marketed under the brand NXTBLOC, which is a green product for the construction industry. Its other brands include NXTFIX, NXTPLAST, and ZSMARTBUILD.

AAC is a steam-cured mix of sand or pulverized fuel ash (PFA), cement, lime and aeration agent.

The company's plants are located in Vapi and Ahmedabad and cater to the Gujarat and Mumbai markets. Its applications include residential, hospitality and commercial.

For more details, see the Bigbloc Construction company fact sheet and quarterly results.

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