This multibagger stock delivered 1,000% returns in 5 years; do you own it?

Amid a staggering rally in Indian equities during the coronavirus pandemic, several shares have entered the list of multibagger stocks in 2021. HEG Ltd, the country’s leading manufacturer and exporter of graphite electrodes, is one such multibagger stock that has delivered a massive return to its long-term investors on the back of strong demand for electrodes from global steelmakers. The rally in the stock was also attributed to rising prices of graphite electrodes, used in steel production, which surged amid reduced global supply as well as drop in Chinese steel exports.

Shares of HEG, a part of the LNJ Bhilwara Group, have surged from ₹149 to ₹1,635 apiece levels in a five-year period, registering a growth of 970% during the period. The mid-cap stock has surged 80% over the last one year, and 69% on a year-to-date (YTD) basis.

In last six months, HEG shares have depreciated from around ₹592 to ₹1,595 per share, logging over 27% dip in this period. It has dropped 20% in the last one month and 8.5% over the last five sessions.

On Wednesday, HEG shares closed 3.97% higher at ₹1,595.45 apiece on the BSE. There was a spurt in volume trade as 16,000 shares changed hands over the counter as compared to the two-week average volume of 14,000 shares. The market capitalisation of the company surged to ₹6,157 crore. The stock witnessed a surge in buying amid bargain hunting due to recent heavy sell-offs.

Meanwhile, the BSE Sensex benchmark index closed 611.55 points, or 1.09%, higher at 56,930 on Wednesday, led by gains in index heavyerights such as Reliance Industries, Sun Pharma, SBI, Bharti Airtel, Bajaj Finance, Tata Steel, and L&T.

As per the latest shareholding pattern available on the BSE, 18 promoters owned 55.13% stake in the company, while public shareholders stood at 44.87% at the end of September quarter. During the quarter, promoters trimmed their stake in the company by 4.49%, from 59.62% in the previous quarter.

For the second quarter ended September 30, 2021, the carbon and graphite product manufacturing company reported a consolidated net profit of ₹131.52 crore on the back of robust revenue growth. It had registered a consolidated net loss of ₹15.36 crore in Q2 FY21 and a profit of ₹56.77 crore in Q1 FY22.

During the July-September period, HEG's revenue from operations surged 60% to ₹517.56 crore, from ₹322.88 crore in the corresponding quarter of the previous fiscal. The earnings before interest, tax, depreciation, and amortization (EBITDA) stood at ₹167.28 crore against a loss of ₹25.46 crore in the prior year. The main business of HEG is graphite which accounts for 80% of the company’s revenue.

The management had said in its earnings report that it had undertaken an expansion project in the past to increase the existing capacity of graphite electrodes from 80,000 tonnes to 100,000 tonnes, and the same is going on in full swing. It admitted that there was a few months delay due to the pandemic and the management expects the expansion project to be completed in the October-December 2022 quarter. The company aims to begin commercial production by early 2023.