These 2 smallcap stocks have zoomed over 100% in 5 wks; hit multi-year high

Shares of Kitex Garments and Tribhovandas Bhimji Zaveri have hit multi-year highs after rallying up to 17% on the BSE in Monday's intra-day trade on the back of heavy volumes.

Shares of Kitex Garments (KGL) and Tribhovandas Bhimji Zaveri (TBZ) hit multi-year highs after they rallied by up to 17 per cent on the BSE in Monday’s intra-day trade in an otherwise weak broader market on the back of heavy volumes.

In comparison, the BSE Smallcap and Midcap indices were down 0.97 per cent and 0.79 per cent, respectively.

Shares of KGL climbed 5 per cent today to freeze in upper circuit for the second straight day, at Rs 488.80 on the BSE. It was trading at its highest level since April 2017.

In the past 16 trading days, the stock price of the garments and apparels company has surged 104 per cent after the company’s net profit during April to June quarter (Q1FY25) more-than-doubled to Rs 29.95 crore from Rs 7.99 crore in the year ago quarter.

 

Total revenue rose 32 per cent year-on-year (Y-o-Y) at Rs 195.02 crore, compared to Rs 147.84 crore in the same period last year, primarily driven by strong demand from existing customers. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin improved to 23.77 per cent in Q1FY25, as compared to 11.19 per cent in Q1FY24.

Meanwhile, on August 19, 2024, Sabu M Jacob, chairman and managing director of KGL, stated that the company’s capacity utilisation is currently at its peak and the factory order position is fully booked up to June 2025. 

With the surge in demand and favourable global market conditions, the company expects to achieve its all-time high record over the last three decades in terms of turnover and profits, Jacob said.

In the past five weeks, the stock price of KGL has zoomed 131 per cent from the level of Rs 211.20 on August 5. The company is the world’s second-largest manufacturer of cotton and organic cotton, ready-to-wear garments for infants and children aged 0-24 months. Operating under the yarn-to-garments model, KGL is a fully export-oriented unit that caters to major clients in the US and European markets.

The global infant garments industry, valued at approximately $45 billion in 2023, continues to demonstrate robust growth potential. With the increase in world population, it is anticipated to grow at a projected compound annual growth rate (CAGR) of 4.7 per cent between 2024 and 2032.

Further, KGL is strategically expanding its operations in Telangana through its subsidiary, Kitex Apparel Parks Ltd (KAPL). The ambitious expansion project has a total planned cost of approximately Rs 3,000 crore, funded through a 70:30 debt-to equity ratio, with equity contributions split between KGL and Kitex Children’s wear (KCL). The expansion includes two key projects: one at Kakatiya Mega Textiles Park and another at Sitarampur Industrial Park near Hyderabad.

Moreover, the company's Warangal project is nearing completion, with Rs 918 crore spent out of the planned Rs 1,490 crore, and commercial production is anticipated to start in December 2024. For the Sitarampur Project, land payments have been fully settled, with land documentation expected in October/November 2024.

The company has already spent Rs 92 crore on this project, with commercial production scheduled for March 2026. Given the current high demand for infant wear, KGL expects a record turnover and profitability for the year.

Meanwhile, shares of Tribhovandas Bhimji Zaveri (TBZ) have soared 17 per cent to Rs 274.35 on the back of a two-fold jump in the company's scrip's average trading volumes. In the past five weeks, the stock of the jewellery company has zoomed 102 per cent from the level of Rs 135.75. It is trading at its highest level since December 2012.

TBZ specialises in crafting and retailing an exquisite range of meticulously handcrafted gold, diamond, jadau, and platinum jewellery. The company manufactures a wide array of jewellery from exquisite pieces, for weddings, festivals, and special occasions to contemporary, lightweight designs for daily wear.

However, TBZ, in an exchange filing on August 29, said the movement in the company's share price is purely market driven and may be combination of various factors including market conditions. The management of the company is in no way connected with the movement in the price of the shares.

“We would like to inform you that there is no price sensitive information or announcement which is pending to be intimated to the Exchange concerning operations of the Company. We hereby further inform that we are not aware of the reason of significant movement in the price of Company's shares,” TBZ had clarified to the exchanges on being quizzed about the movement in its stock price.

That apart, the company's management had said, the outlook for the jewellery industry remains optimistic in its FY24 annual report. As India progresses towards becoming a $5-trillion economy, the management anticipates a steady increase in income levels and consumer spending. Despite challenges such as inflation and global uncertainty, demand for jewellery is expected to grow, driven by robust economic growth, favourable demographics, expanding middle class, and evolving consumer behaviours, it added.

The outlook for the Indian gems and jewellery industry is positive, with anticipated ongoing shifts in consumer purchasing behaviour transitioning from the unorganised to the organised sector.

The industry had received a significant boost from the Union Budget 2024-25, when customs duties were reduced on precious metals. The budget lowered customs duties on gold and silver to 6 per cent from 15 per cent, and on platinum to 6.4 per cent from 15.4 per cent.

"These adjustments are intended to foster greater domestic value addition in gold and precious metal jewellery, aligning with sustained industry demand. Moving forward, the sector’s growth is anticipated to be propelled by the expansion of major retailers and brands, TBZ stated in its annual report.