Ace Investor Mukul Agarwal Picks Stake in this Multibagger Engineering Stock that Surged 800% in Past Five Years

Superstar investor Mukul Agrawal added as many as 4 new stocks in his portfolio in the March 2023 quarter.

In the past one month, shareholding patterns filed by ISMT Ltd, De Nora India, and TAAL Enterprises, show that Agarwal purchased equity stake in these firms in the March 2023 quarter.

Over the weekend, one more company filed its shareholding pattern for March 2023 and Mukul Agarwal's name was seen in the key shareholders list.

Mukul Agrawal is a prominent investor in India, who is known for his microcap stocks and smallcap stock picks.

With over 55 stocks in the kitty, his portfolio is worth over Rs 30 billion (bn).

Which stock did Mukul Agarwal buy and why?

The latest shareholding pattern of Thejo Engineering shows that Agarwal holds 1.68% stake in the company as of March 2023. Prior to this, in the December 2022 quarter, his name was missing from the list.

This means perhaps he had a partial stake already and has now decided to double down. Or he could have bought the entire stake in the quarter gone by.

He now holds a 1.68% stake worth Rs 262 million (m).

While we don't know the exact reason why Agarwal bought a stake in Thejo Engineering, there are some reasons we can guess...

The engineering firm provides installation, regular maintenance and operation and maintenance (O&M) services for conveyor belt systems.

Apart from this, it also has expertise in design, manufacturing and supplying a wide variety of rubber and polyurethane products.

In the recent past, Thejo Engineering has spent a lot on expansion with the company's management laying out a big capex plan.

The company has spent about Rs 1.5 bn in capex towards expansions including a 3.1-lakh square feet manufacturing unit in Chennai.

It also added a 1.18-lakh square feet new manufacturing unit in Perth, Australia, for its Australian subsidiary, Thejo Australia Pty Ltd.

Rs 1.5 bn is a big commitment by a small firm like Thejo Engineering. The company's current marketcap is around Rs 15.6 bn, which has factored in the rally in share price in recent months.

So one reason why Agarwal is bullish on the company is because of its high spend towards capacity expansions and new facilities.

The other reason could be the company's strong financial performance over the years and in recent quarters.

The company has more than doubled its revenue in the past five years while profit has grown over three times.

Thejo Engineering Financial Snapshot (2018-2022)

Rs m, consolidated	FY18	FY19	FY20	FY21	FY22
Revenue	2,209	2,295	3,039	3,271	4,245
Growth (%)	22.1%	3.9%	32.4%	7.6%	29.8%
Operating Profit	281	326	493	530	700
OPM (%)	12.7%	14.2%	16.2%	16.2%	16.5%
Net Profit	111	134	251	265	376
NPM (%)	5.0%	5.8%	8.3%	8.1%	8.9%
Debt to Equity (x)	0.5	0.4	0.4	0.1	0.1

Data Source: Ace Equity

Going forward, the huge capex commitment will help the company's revenue and margins to improve in the medium term.

One key concern that investors should take note of is promoter holding in the company has constantly declined.

How Thejo Engineering share price has performed recently

Thejo Engineering is only listed on the NSE. The company today opened the day up at Rs 1,495, up 2.5% against its previous close of Rs 1,453.

In the past one year, shares of the company have gained over 40% while in 2023 so far, Thejo Engineering share price is up 29%.

In the past five years, shares of the company have generated returns of over 800%!

Have a look at the table below to see how it compares with peers.

Comparative Analysis

Company	Thejo	Deep Industries	MTAR Tech	Kennametal	Alphageo
ROE (%)	29.3	6.6	12.2	18.6	4.6
ROCE (%)	37.1	8.4	16.1	24.8	7.0
Latest EPS (Rs)	35.2	12.2	30.0	53.3	32.7
TTM PE (x)	41.3	13.4	62.2	46.5	7.8
TTM Price to book (x)	9.5	0.9	9.7	8.1	0.6
Dividend yield (%)	0.1	1.0	0.2	1.0	3.1
Industry PE	21.3
Industry PB	3.3

Data Source: Ace Equity, Equitymaster

About Thejo Engineering

Thejo Engineering is the first company to be listed on NSE's MSME platform EMERGE.

It's one of the few companies offering manufacturing, marketing, and servicing activities under one roof. The engineering firm also has a global presence with subsidiaries in Australia, Saudi Arabia, Brazil, and Chile.

To know more, check out Thejo Engineering's financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...