Shares of Shivalik Bimetal Controls Ltd. surged by 4.5% on 27th September following a significant block deal worth ₹500 crore on the stock exchange. This development caught the attention of investors, particularly those looking to invest in stocks that are showing strong performance.
The deal involved the exchange of 81.8 lakh shares at a floor price of ₹611 per share, representing a slight discount of nearly 1% from the previous closing price. Despite this, shares were trading higher at ₹639.15 per share on the National Stock Exchange (NSE) by 9:20 am.
Impact of financial performance on share value
Shivalik Bimetal Controls' financial performance has been mixed in recent quarters. For the April-June 2024 quarter, the company reported revenues of ₹125.98 crore, slightly down from ₹127.19 crore during the same period last year. Additionally, the company’s net profit dropped by over 16% to ₹17.82 crore, compared to ₹21.28 crore in the previous year.
These declines, however, have not dampened investor sentiment, as the company’s long-term prospects remain robust. For those looking to invest in stocks, the company’s consistent performance and future potential are encouraging factors.
Analyst recommendations and growth outlook
Earlier this year, JM Financial, a prominent brokerage firm, initiated coverage of Shivalik Bimetal Controls with a buy rating and set a target price of ₹730 per share. The firm noted that Shivalik Bimetal’s expertise in bimetal and electrical contacts, along with its expansion into the shunt resistor business, positions it well for future growth. The company ventured into this business segment in 2014-15 and has since solidified its presence in the domestic market.
The report highlighted that the company is now focused on expanding its export capabilities. Recent capital investments and increased production capacity support this strategy, which is expected to drive future growth.
Revenue and profitability outlook
According to JM Financial, Shivalik Bimetal is expected to see a compound annual growth rate (CAGR) of 25% in revenue and 29% in EBITDA and profit after tax (PAT) from FY24 to FY26. This positive outlook, coupled with a Return on Capital Employed (RoCE) of 30.4% and a Return on Equity (RoE) of 24.1% for FY26E, has given analysts confidence in the company’s future.
The stock is currently trading at 22 times the estimated earnings for FY26, but JM Financial has valued it at 30 times the projected earnings for that year.
Strong customer relationships and customised products
Shivalik Bimetal Controls has a competitive edge in the market due to its strong and long-lasting customer relationships. The company derives 75% of its sales from customised products tailored specifically to meet individual client requirements. Over the past decade, Shivalik Bimetal has maintained a perfect track record of client retention, having not lost any customers.
With such consistent client relationships and a clear growth strategy, the company continues to build investor confidence, reinforcing its status as a key player in the industry.
The surge in share price after the ₹500 crore block deal indicates a strong demand for Shivalik Bimetal’s shares despite some near-term fluctuations in financial performance. Investors are optimistic about the company’s future as it focuses on expanding its product offerings and geographic reach.
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