Single-digit PE multibagger penny stock reports profit for first time in the last 7 years; board meeting scheduled on November 20; watch out!

In the past year, its stock jumped a whopping 758 per cent, reaching a new high on Friday by hitting an upper circuit

When you think of Transformers, you might imagine giant robots from the movies. But there's a different kind of excitement happening in the stock market with a company called Alfa Transformers Ltd. In the past year, its stock jumped a whopping 758 per cent, reaching a new high of Rs 74.80 on Friday by hitting an upper circuit of 1.99 per cent. That's quite a ride for a stock that's considered a penny stock, trading below Rs 100, with a market cap of Rs 68.4 crore.

Established in 1982, Alfa Transformers makes small distribution transformers and provides technical help and repair services. Currently, its stock is valued at a modest PE of 8.19x.

Now, here's where the story gets interesting. The company is thinking about demerger its units in Bhubaneswar and Vadodara for various reasons like accumulated losses, business considerations, and restructuring. It's like a corporate makeover.

The Board at its meeting scheduled to be held on Monday, November 20, 2023 at 12:00 P.M. will consider the above Scheme of Demerger and if necessary, appoint;

a. Valuer to carryout valuation;

b. Consultant to draft the Scheme of Demerger and

c. Consider Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 & connected SEBI Circular to the extent applicable.

Going back a bit and taking cues from Annual Report, Tata Power, a big player, changed how it deals with companies like Alfa Transformers. This led Alfa Transformers to focus more on private customers, like contractors and industries, boosting its turnover significantly.

One of its units in Bhubaneswar, despite losing Tata Power tenders, made a comeback with projects like making transformers for hockey stadiums and hospitals.

On the other hand, the Vadodara unit faced challenges and temporarily stopped manufacturing due to a lack of orders. However, it found success in repairing transformers and getting new orders. With Rs 30.18 crores in orders, it hopes for a better future.

Surprisingly, after seven years, Alfa Transformers achieved profit during FY23. Furthermore, it reported a profit of Rs 6.06 crores in quarter ended September 2023, thanks to deferred tax.

Now, the big question: Is Alfa Transformers a hidden gem or a risky bet? What do you think? Share your thoughts in the comments as the story of Alfa Transformers unfolds in the world of penny multibagger stocks.

Disclaimer: This article is for informational purposes only and not intended as investment advice.