Ace investor Dolly Khanna has dug up this promising mineral stock

Top investors anticipate a promising year for these stocks, with Dolly Khanna, making a strategic entry into one such company after Rekha Jhunjhunwala bought and sold shares of Raghav Productivity Enhancers, which manufactures and exports quartz-related products

Who is Dolly Khanna?

Dolly Khanna is an investor in Chennai who is known for picking some lesser-known mid caps and small caps. She has been investing in stocks since 1996.

Her portfolio, which is managed by her husband Rajiv Khanna, is usually tilted towards more conventional stocks in manufacturing, textiles, chemicals, and sugar industries.

Which stock did she buy?

The mineral stock she invested in is 20 Microns, India’s largest producer of ultrafine industrial minerals and specialty chemicals.

The company's latest shareholding pattern included Khanna as a new name in the list of investors. According to its latest filing, Khanna held a 1.29% stake as of September. Every quarter, companies are required to reveal shareholders with stakes of 1% or more. Her name wasn't on this list in the previous quarter, meaning she had a stake of less than 1% in the company at the time, or no stake at all.

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While the exact reasons for her fresh investment remain unknown, here are a few factors that could explain it.

Foreign outflows

Indian stock markets have dipped recently as foreign investors have shifted funds from Indian to Chinese stocks.

In the case of 20 Microns, foreign institutional investors (FIIs) have steadily increased their stake over the past two quarters. Although the numbers remain small, this growing FII interest may have played a role in Khanna's decision to invest in the company.

Global growth strategy

Khanna's decision to invest may also stem from 20 Microns's big acquisition in Malaysia. In July 2024 it was reported that the company would acquire 5.45 lakh shares in its Malaysian subsidiary, 20 Microns SDN BHD, for about 120 million Malaysian ringgit ( ₹24.37 crore).

Established in 2008, the Malaysian subsidiary focuses on trading calcium carbonate and producing superfine limestone powder. The acquisition is expected to enhance forward integration in 20 Microns's minerals business and broaden its global operations.

Steady growth in financials

One clear reason for Khanna's investment is the steady financial growth of 20 Microns. The company has consistently increased its sales and profits over the past three quarters, and its historical financial performance reflects a positive trend that reassures investors.

This growth is on account of continued focus on operational efficiency, favourable changes in the product mix towards more value-added products, and the company’s ability to procure raw materials from diverse sources.

What next?

FY24 was a remarkable year for 20 Microns, as the company reduced its debt by almost 25% and launched more than 10 new products.

Its expansion strategy has taken it beyond domestic borders, with new supply agreements in Eastern Europe, Russia, Italy, the Middle East, and Southeast Asia.

Looking ahead, 20 Microns is likely to benefit from the ‘China-plus-one’ megatrend, and it's positioning itself to compete with Chinese products while exploring potential mining opportunities both in India and abroad.

As the company prepares to release its Q2 earnings next week, investors are eager to hear management's insights on how freight cost increases and supply chain challenges, such as container shortages and vessel rerouting, have affected operations. The earnings announcement for the quarter and half year to September is scheduled for 25 October.

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Stock performance

In the past month, 20 Microns stock has fallen 6%, but it's still up 58% so far in 2024.

As expected, the stock opened on a positive note on Tuesday in response to the news that Khanna had bought shares of the company during the previous quarter. The stock hit the 5% upper circuit at ₹282 from its previous close of ₹268.

20 Microns stock touched a 52-week high of ₹347 on 22 August 2024 and a 52-week low of ₹130 on 25 October 2023. In the past year the stock has rallied 99%.

Here’s how 20 Microns compares with its peers.

 

About 20 Microns

20 Microns is a leading industrial mineral company with three decades of experience. It specialises in micronisation of various industrial minerals such as calcium carbonate, talc, kaolin, mica and quartz.

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The company operates nine manufacturing facilities and warehouses across India with a total capacity of over 4.5 lakh metric tons per annum.

To know more, check out the detailed financial fact sheet of 20 Microns.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com