Though, because of the ongoing Ukraine crisis, the stock market is showing very much volatility, few stocks are still giving extraordinary returns to their investors. One of these stocks is SEL Manufacturing Company. The price of this stock has jumped from Rs. 5.01 per share to Rs. 309.80 in just 4 months.
Impact on Investment
In search of a multi-bagger stock, if an investor had invested ₹1 lakh in this stock on 28th October, his/her ₹1 lakh would have turned into ₹61,83,608 today. This means he/she would have earned more than 61 times return.
About the Company
As per the official website of SEL Manufacturing Company, ‘’SEL is a leading vertically integrated textile conglomerate, operating in various textile sub-segments having facilities right from spinning, knitting, processing of yarns and fabric, to the value-added products viz. terry towels and ready-made garments.’’
Why SEL give so much Return?
The reason behind the exceptional appreciation in the stock price of SEL Manufacturing Company is mainly its profits. Since, March, 2014 to March, 2020 the company has posted loss continuously. However, in the March, 2021, SEL Manufacturing Company has posted a huge profit of Rs. 2,507 crores. This probably attracted the attention of investors.
Well, as the stock has given this much high return, should you invest in the stock? Let us dig deeper into the stock to find the answer.
Analysis of SEL Manufacturing Company Ltd.
Market Size of SEL Manufacturing Company Ltd.
- The market size of SEL Manufacturing Company Ltd. Is over 600 crores. This means, it is a small cape company. The risk in a small cap company is comparatively more than large and mid cap companies.
Promoter Holding of SEL Manufacturing Company Ltd.
- For the last few quarters, Promoters’ holding has remained constant at 75.27%. Over 3/4th of promoter holding is an indication that they are expecting the company to grow. Promoters have the first hand on any information about the company. Generally, if there is scope of company’s growth, the promoters generally increases their stake in the company.
Institutional Investors Holding of SEL Manufacturing Company Ltd.
- Apart from the promoters, there is a nice amount of institutional investors holding in the stock. Foreign Institutional Investors has 0.13% holding while Domestic Institutional Investors has almost 24% stake in the company. This can be considered as a positive signal for the company.
Debt of SEL Manufacturing Company Ltd.
- However, the company has huge debt few years ago, it seems that the company is on the path of decreasing its Debt.
Return on Equity of SEL Manufacturing Company Ltd.
- The current ROE of the Company is very poor at 7.81%.
Return on Capital Employed of SEL Manufacturing Company Ltd.
- Company’s Return on Capital Employed or ROCE is very poor, even it is in negative at -11.78%. This means, every Rs. 100 the Company raises, it generates a loss of Rs. 11.78.
PE of SEL Manufacturing Company Ltd.
- The present PE ratio of the Company is only 0.25. Hence, valuation wise the stock is very cheap.
Cash Flow of SEL Manufacturing Company Ltd.
- The Net Cash Flow of the Company is fluctuating. At the end of March, 21 SEL Manufacturing Company Ltd. has only 4 crores as cash in hand. The amount is very poor.
Profit & Loss of SEL Manufacturing Company Ltd.
- After a long period of loss, the Company finally had shown the face of profit at the end of March, 21. However, after that, the company is again posting losses. Though its losses are decreasing quarter on quarter basis.
Industry of SEL Manufacturing Company Ltd.
- The demand in this sector is expected to increase due to increasing disposable income of the middle class. However, the textile industry is highly dependent on one raw material which is cotton. Further, the sector is facing challenges from countries like Bangladesh, Pakistan due to the low cost of production in those countries.
Last Words
While investing in a stock, the basic two things investors should check is – their risk appetite and the fundamental of the company. Above, we have tried to give you an analysis of SEL Manufacturing Company Ltd. However, you should invest in a stock only after doing your own analysis.
Disclaimer: Investing in the stock market is always risky. So do not take the stocks mentioned in this post as a recommendation in any way. The stocks named in this post are for educational purposes only. The author of this post or anyone associated with this blog will not be held responsible in any way if anybody suffers a loss by investing in the stock market after reading this article.
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