From Rs 42 to Rs 65: Can this Smallcap Piping stock turn out to be a multibagger?

Having high growth prospect, long-term investors should keep a close watch on this stock in the upcoming trading sessions.

Good quality Smallcap stocks have seen strong buying interest on Tuesday, as positive global cues and good corporate earnings boosted investors’ confidence in the risky assets. That being said, Nifty Smallcap index has jumped 0.77 per cent and is the leading performer amongst the indices. Interestingly, one stock has recorded huge buying activity on the bourses and has surged over 15 per cent during the initial hours of Tuesday’s trading session.   

The stock is Texmo Pipes and Products (NSE Code - TEXMOPIPES), which has recorded one of the highest volumes in recent past. Before looking at its performance, let’s analyse what the company business is.  

COMPANY PROFILE  

Texmo Pipes and Products Ltd is a Rs 189 crore Smallcap company, primarily engaged in the manufacturing and supplying of pipes, fittings and other related products in India. The company was founded in 2008 and is headquartered in Burhanpur, Madhya Pradesh. It offers a wide range of products including PVC pipes, CPVC pipes, HDPE pipes, SWR pipes, column pipes, casing pipes, plumbing pipes and fittings. These products are used in various industries such as agriculture, infrastructure, housing and industrial applications.  

KEY TRIGGERS  

Infrastructure development: The company products are used in various infrastructure projects such as water supply, sewage and irrigation. Therefore, any increase in infrastructure spending by the government or private sector can boost the demand for the company's products.  

Agriculture: The company's products are used in agricultural applications such as irrigation and water supply. Therefore, any increase in agriculture-related activities and investments can boost the demand for the company's products.  

Regulatory environment: Any changes in government regulations related to the use of plastic pipes and fittings can impact the demand for Texmo Pipes and Products' products. The company's ability to comply with the changing regulations can determine its future growth prospects.  

International expansion: The company's focus on expanding its international presence can provide new growth opportunities. Any successful expansion into new markets can increase the company's revenue and profits.  

FINANCIALS  

In its recent Quarterly Results, the company reported 55 per cent YoY growth in revenue to Rs 206.38 crore, while its net profit stood at Rs 3.21 crore in December 2022. Interestingly, it's important to note that the ROCE has been moving in the right direction. The numbers show that in the last five years, the ROCE has jumped considerably to 7.0 per cent. In a nutshell, the business is earning more per rupee of capital invested and in addition to that, 34 per cent more capital is being employed too. This indicates that there are huge opportunities to invest capital internally and at ever higher rates, a combination that's common among multibagger stocks.  

TECHNICAL ANALYSIS  

The stock has surged from Rs 42 to Rs 65 in nearly one month, backed by massive volume. It is above all its key moving averages and showing strong upside momentum. The other technical parameters also suggest good momentum.   

CONCLUSION  

Overall, the stock is a potential candidate that can be included in the portfolio. Having high growth prospect, long-term investors should keep a close watch on this stock in the upcoming trading sessions.