This smallcap stock has zoomed over 100% in 5 months; hits new high

Shares of Sanghvi Movers, a major player in the crane rental industry, moved higher by 11 per cent to Rs 1,282.95 on the BSE on Tuesday

Shares of Sanghvi Movers, a major player in the crane rental industry, moved higher by 11 per cent to Rs 1,282.95 on the BSE, hitting a new high in Tuesday's intra-day trade, after the company incorporated a wholly-owned subsidiary (WOS) named 'Sangreen Renewables Private Limited; on Saturday, March 23, 2024.

The stock of smallcap company surpassed its previous high of Rs 1,250 touched on March 1. A combined 724,000 shares, representing 1.7 per cent of total equity of SML, changed hands on the NSE and BSE till 01:28 PM. In comparison, the S&P BSE Sensex was down 0.3 per cent at 72,613.

"Sangreen Renewables will carry on the business related to providing full-fledged turnkey services to Independent Power Producers (IPP) right from Conceptualization to Commissioning of wind turbine generators (WTG). The business of the WOS is not outside the main line of business of the company," Sanghvi Movers stated in an exchange filing. 

SML is engaged in the supply of medium and heavy-duty cranes on rental basis to private and public sector undertakings. It is the largest crane rental company in India and Asia, and the sixth-largest in the world, as ranked by International Cranes (June 2023).

The company has a fleet of 400 medium to large-sized heavy-duty telescopic and crawler cranes ranging from 20 to 1000 MT across 130 operational job sites in India.

In the past five months, the stock price of SML has more-than-doubled, zooming 107 per cent from the level of Rs 621 on October 26, 2023. While, since April 2023, the stock price of the company has skyrocketed 267 per cent from Rs 349.75 quoted on March 31, 2023.

For the third quarter of the financial year 2023-24, the company's consolidated net profit surged 76 per cent year-on-year (Y-o-Y) to Rs 61.28 crore. While the company’s net sales rose by 36 per cent Y-o-Y to Rs 167.04 crore. According to Value Research, the shares of Sanghvi Movers are trading at price to equity multiple of 25 times. 

Meanwhile, in first nine months ended December 2023 of the financial year 2023-24 (9MFY24), SML had posted a strong 79 per cent year-on-year (YoY) jumped in profit after tax at Rs 140.19 crore, as compared to Rs 78.11 crore in the same period last fiscal. Income from operations grew 37.7 per cent YoY at Rs 453.08 crore.

The increasing popularity of crane rental services throughout the country is driving the market, with end-user industries, including oil and gas, mining, automotive and transportation, utilising cranes, further spurring market growth. In addition, the substantial growth of the Indian real estate sector is generating a surge in demand for crane products.

With the continued government focus on infrastructure development, demand for cranes has increased and is expected to remain buoyant over the medium-term. Wind sector is the major contributor to SML's revenue, where the actual execution is lower than renewable purchase obligation (RPO) targets set by the government.

"Additionally, the Indian Government’s target of achieving 500 GW of clean energy by 2030 with wind power contributing 140 GW, presents an opportunity for the heavy equipment and machinery industry to expand its business in the wind power sector. The increase in demand for wind turbines and related equipment creates a potential market for companies to offer crane rental services for installing, maintaining and repairing wind turbines," SML had said in its FY23 annual report.

Rating agency ICRA expects the execution to ramp-up to 2.5 GW-3.0 GW annual installations in the medium term. "Apart from the wind sector, it has presence across various other industries such as steel, cement, refinery, etc, which are looking at the significant capacity addition in medium to long term, which augurs well for SML’s growth potential," the agency had said in its rationale dated June 30, 2023.