Once a penny stock,Lloyds Metals and Energy (LME)has given multifold returns to its investors in the last 3 years. The stock has skyrocketed over 6,024 percent in this period, from ₹11 in March 2021 to currently trade at ₹673.70. Meanwhile, it rose over 136 percent in the last 1 year, rising from ₹284.70.
However, in 2024 year-to-date (YTD), the stock has gained just 13 percent, giving positive returns in 3 of the 4 months so far. The stock has jumped 11 percent in April so far after a 0.7 percent rise in March and a 5.3 percent gain in February. Meanwhile, it shed 5.5 percent in January 2024.
The stock hit its record high of ₹710.50 last week on April 12, 2024, skyrocketing over 156 percent from its 52-week low of ₹277.40, hit on April 25, 2023.
Read here: Multibagger: This penny stock has skyrocketed over 29,000% in 3 years
Lloyds Metals and Energy Limited manufactures and sells sponge iron products in India. The company operates in three segments, Sponge Iron, Power, and Mining. It also offers direct sponge iron and by-products, such as char, fly ash, ESP dust, bed materials, and iron ore fines. The company is involved in the generation and distribution of power. Lloyds Metals and Energy Limited was incorporated in 1977 and is based in Mumbai, India.
Last month, the board of Lloyds Metals and Energy considered and approved raising funds worth up to ₹5,000 crore through a Qualified Institutional Placement (QIP). Lloyds Metals will raise these funds in one or more tranches.
"The Board Members in their meeting have also discussed that fundraising should be done in an organic and the most efficient way taking into cognizance that the Promoter holding should not be diluted to a greater extent," the company statement said. As of the December quarter, promoters of Lloyds Metals held a 65.7 percent stake in the company.
Read here: Penny stock below ₹5 touches upper circuit after Q4 results 2024
Earnings
In the December quarter, LME posted a net profit of ₹ ₹331 crore, up 44 percent from ₹230 crore during the previous quarter ended December 2022. However, its revenue for the quarter ended December 2023 came in at ₹1,910 crore, surging over 91 percent versus ₹999 crore in the corresponding quarter last year. EBITDA stands at ₹460.75 crore in Q3FY24 up 79.46 percent from ₹256.74 crore in Q3FY23.
Brokerage view
According to ICICI Direct, LME demonstrates robust trailing twelve-month EPS (earnings per share) growth and has efficiently utilized its capital to generate profits, with Return on Capital Employed (RoCE) showing improvement over the past two years. Additionally, the stock has displayed strong momentum, consistently surpassing short-, medium-, and long-term moving averages. These indicators underscore the company's adeptness in profit generation, effective capital utilization, and dedication to enhancing shareholder value.
Meanwhile, its weakness, as per the brokerage, is:
- Negative Breakdown Second Support (LTP < S2)
- Promoters increased pledged shares QoQ
- Poor cash generated from core business
- Declining Cash - Flow from Operations for last 2 years
Read here: Once a penny stock, Cinerad Communications soared 2051% in just 1 year
About penny stocks
Investing in penny stocks may appear alluring due to their potential for high returns, but it's crucial to grasp the considerable risks they entail. These stocks might not be suitable for everyone, especially those averse to risk. Only individuals comfortable with high-risk investments and willing to allocate a small portion of their portfolio should consider them. Seeking advice from a financial advisor before making any decisions is highly recommended.
Penny stocks pose numerous challenges. They often represent small, lesser-known companies with limited analyst coverage and minimal publicly available information. Additionally, the lack of transparency and access to management insights complicates investment decisions.
Read here: Multibagger: This penny stock surged 1,011% in just one year; should you invest?
Moreover, penny stocks are susceptible to various risks such as illiquidity, high-impact costs, and difficulties associated with low trading volumes. Without compelling reasons supported by thorough research, investing in penny stocks is generally not advisable for serious, long-term investors seeking stability and growth in their portfolios.
Disclaimer: This story is for educational purposes only. Please speak to an investment advisor before making any investment decisions.
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First Published:
15 Apr 2024, 10:53 AM IST
