Indian benchmark BSE Sensex gained 18% in the financial year 2022, but several smallcap and penny stocks outperformed the index by multifold. Cosmo Ferrites Ltd (CFL), a leading manufacturer and exporter of soft ferrites, are one of those multibagger stocks that have delivered stellar returns this fiscal as investors cheered robust earnings and strong outlook. Shares of this little-known company rallied as much as 3,528% in one year, with stock price rising from a meagre ₹17.5 on March 31, 2021 to ₹635 in intraday on March 31, 2022.
If you had invested ₹1 lakh in the stock at ₹17.5 apiece on March 31 last year, it would have become ₹36.28 lakh at present.
Established in 1986, CFL manufactures soft ferrites and coils which cater to a wide clientele, comprising manufacturers of transformers, compact fluorescent lights, mobile phones, wireless chargers and inductive heaters. CFR products serve all major applications like solar inverter, sensor, VFD drive, energy meter, lighting, SMPS, battery charger, induction welding and heating application.
On Wednesday, Cosmo Ferrites shares opened 4.22% higher to hit a fresh 52-week high of ₹635 on the BSE, against the previous close price of ₹609.30. However, the stock soon slipped into negative terrain to hit an intraday low of ₹578.85, down 5%. The market capitalisation of the microcap rose to ₹705.56. CFL shares have delivered consistent returns throughout the year by rising 15% in a week, 56% in one month, and 105% since the beginning of the calendar year 2022.
Earlier this week, CRISIL Ratings upgraded its ratings on the bank facilities of Cosmo Ferrites to ‘CRISIL BB/Positive/CRISIL A4+’ from ‘CRISIL B-/Stable/CRISIL A4’, citing the turnaround in the operating performance of the company as seen in the increased scale of operations and margins. The agency expects the company to benefit from its strong market position, expected demand from end-user industries and healthy client relationships.
“The ‘Positive’ outlook factors CRISIL Ratings’ expectation that the sharp recovery in revenue and operating margin should sustain and further improve the business risk profile,” the rating firm said in its report dated March 28.
The company registered 16% revenue growth in FY21 and more than 80% in the first nine months of the current fiscal (FY22) along with an operating margin more than doubling in 9M FY22. The increased scale of operations was driven by healthy demand from end-user industries along with price increases taken by the company, while margins improved due to various cost efficiency measures undertaken apart from the benefits of operating leverage.
During the nine months ending the financial year 2022, CFL posted revenue growth of more than 80% and a doubling in operating margin. The increased turnover was driven by healthy demand from the end-user industry along with price increases taken by the company, while the enhancement in margins was due to various cost efficiency measures undertaken and benefits of operating leverage.
For the third quarter ended December 31, 2021, CFL posted net profit of ₹4.08 crore as against ₹0.36 crore in the same period last year and ₹3.51 crores for the period ended September 30, 2021. The total income nearly doubled to ₹35.21 crore in Q3FY22, as compared to ₹19.70 crore in the corresponding period last year. It had reported a total income of ₹26.83 crore during the quarter ended September 30, 2021.