Quality microcap stock priced above ₹10,000 zooms 9%
- Kaycee Industries posted its earnings for the September quarter on 1 November. Operating margins remained stable in the double digits, and the company clocked marginal growth in its top line and bottom line
Retail investors are often drawn to stocks that are relatively low-priced and tend to stay away from high-priced stocks. However, when investing in stocks, it is always wise to keep an eye not just on the price of the company’s stock but its value.
Although the price of shares is determined by the forces of demand and supply on a day-to-day basis, it is fundamentally a function of the total number of shares issued by a company.
In today’s article, let’s look at a microcap company with a stock price above ₹10,000. Shares of the company spiked around 9% in early trade on 2 November after it posted earnings for the September 2023 quarter.
About the company
The company in question is in the electrical equipment space – Kaycee Industries. Incorporated in 1942, it manufactures industrial electrical switches, mechanical counters, electrical components and so on, and has a market cap of ₹735.8 million. It’s a subsidiary of another listed microcap company – Coimbatore-based Salzer Electronics, which acquired 72.32% a stake in it in 2019.
Kaycee Industries provides solutions to various industries and sectors including power, panel builders, machine tool manufacturers, telecom, and renewable energy. It has a manufacturing unit in Vapi.
Why shares of the company zoomed today
On 1 November, Kaycee Industries posted its earnings for the September quarter. Operating margins remained stable in the double digits, and the company posted marginal growth in its top line and bottom line. The company has seen revenue and profit increase for the past few quarters
Its annual performance isn’t bad either. It posted best-ever numbers in FY23 and has zero debt.
The company receives support from Salzer Electronics as both entities operate under a common management and have significant business and financial links.
Salzer is the market leader in cam-operated rotary switches.
How the stock has performed recently
In early trade on 2 November, shares of the company spiked over 9% to hit an intraday high of ₹12,400, but these gains were erased as the session progressed.
Kaycee Industries hit a 52-week high of ₹14,655 on 16 June and a 52-week low of ₹4,702 on 15 November, 2022.
Shares of the microcap company have jumped over 130% in the past year and 30% so far this year.
The company is currently trading at a price-to-earnings (PE) multiple of 20 and a price to book value multiple of 3.4. The promoters hold a 73.9% stake while the rest is held by individual shareholders. Of the 63,470 shares in total, 46,877 are held by promoters while 16,593 are retail investors.
Here’s how it compares with its peers.
A word of caution
Microcaps are more vulnerable to market sentiment and speculation, and therefore more volatile than other stocks.
The success ratio in microcaps is also lower than in bigger businesses. Not all microcaps turn out to be multibaggers, and it’s not unusual to see sharp, rapid declines when bears take hold of the markets, so it’s important to pick up quality microcaps for the long term, with a strong margin of safety built in.
With the right asset allocation, one can benefit from huge payoffs on the upside while not losing much on the downside. Microcap stocks should not comprise more than 10% of one's total equity portfolio.
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
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