Multibagger: Penny stock Kaushalya Infrastructure zooms 2537% in 5 years; should you buy?

Once a penny stock, Kaushalya Infrastructure Development Corp, has turned multibagger, delivering exponential returns to its investors in last five years. From July 2019 to now, the stock price has soared over 2537 percent, rising from ₹40 to ₹1,054.80.

This remarkable growth underscores the company’s strong performance and market confidence, making it a standout in the stock market. Early investors who recognised its potential have seen their investments multiply significantly, showcasing the stock's impressive turnaround and upward trajectory. Such extraordinary gains reflect its past success and highlight its potential as a high-return investment opportunity for the future.

Meanwhile, over the past three years, the stock has surged by an impressive 441 percent, climbing from ₹195.00 in July 2021 to its current levels.

In recent times as well, Kaushalya has continued to demonstrate strong performance, gaining almost 85 percent over the past year and 24 percent year-to-date in 2024. The stock has delivered positive returns in three out of the seven months so far this year. In July, it rallied over 44 percent following a 2 percent decline in June and 3.6 percent fall in May. Prior to that, it showed robust gains of 27 percent in April but declined 21.2 percent in March and 23 percent in February. Notably, January 2024 saw a significant increase of 16 percent in the stock's value.

Moreover, the stock is just 2 percent away from its 52-week high of ₹1,079.00, hit in February 2024. It has shown strong resilience by surging over 129 percent from its 52-week low of ₹461.00, recorded in August 2023.

About the firm

Kaushalya Infrastructure Development Corporation Limited primarily engages in executing construction contracts relating to infrastructure and real estate developments in India. It operates through two segments, Construction and Hotel. The company develops highways, bridges, and industrial infrastructure; electrification and irrigation projects; and residential and commercial complexes. It is also involved in the operation of hotels; acquisition, development, and sale of land; and trading of school shoes and bags. The company was incorporated in 1992 and is headquartered in Kolkata, India.

Earnings

In the March quarter (Q4FY24), Kaushalya Infra reported a standalone net profit of ₹12.18 crore compared to a loss of ₹1.43 crore in the year-ago period. Total income for the quarter was ₹16.5 crore mildly down from ₹16.6 crore a year earlier, while total expenses decreased to ₹0.56 crore in Q4FY24 from ₹1.2 crore last year.

For the fiscal year 2023-24, the firm recorded a consolidated net profit of ₹10.8 crore, a significant turnaround from a net loss of ₹1.77 crore in FY23.

Brokerage views

Brokerage house ICICI Direct highlights several strengths of Kaushalya Infrastructure Development Corp, including its strong momentum with the stock price trading above its short, medium, and long-term moving averages. Additionally, the company has shown rising net cash flow and cash from operating activities, along with strong quarter-on-quarter EPS growth in recent results. These factors indicate a positive market sentiment and a bullish outlook for the firm, supported by its consistent financial performance and growth trajectory.

However, the firm's only weakness, as per ICICI Direct, is its rising other income, and low operating income.

Investing in penny stocks presents the opportunity for substantial returns due to their lower price points, but it also entails significant risks. Penny stocks often encounter liquidity issues, leading to lower trading volumes compared to larger companies. Additionally, they may be subject to less stringent financial reporting requirements and oversight, which can increase the risk of market manipulation and fraudulent activities.

These factors contribute to greater volatility in penny stocks, elevating the risk for investors. To navigate these challenges effectively, investors must conduct thorough research and implement robust risk management strategies. By taking these precautions, investors can better manage the uncertainties associated with penny stocks and protect themselves against potential losses.

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