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In the Indian stock market, the rapid rise in shares of selected companies continues on the basis of new business contracts and strong financial results. In this sequence, the shares of a major company related to infrastructure and manufacturing sector have created history on the exchange and received the biggest order of its lifetime. As soon as the information about this mega project received by the company became public on the stock exchange, a huge crowd of buyers gathered in the stock and it continuously broke the record of its 52-week high. Creating an excellent record of wealth creation in the long term, this stock has doubled the capital of its investors by giving returns of more than 100 percent in the last one year.
The largest work order in the company’s history: What is the scope of the project?
According to regulatory filings made by the company to the stock exchanges, the order is the largest single project won in its corporate history so far. This mega contract deals with advanced engineering, creation of infrastructure and time bound supply of hi-tech equipment. After receiving the Letter of Award (LoA) from the client, the company has accelerated the process of project execution and resource mobilization. With the addition of this historic order, the company’s overall order book has become manifold stronger, making the company’s top-line revenue visibility for the upcoming financial years extremely clear and secure.
More than 100% return in 1 year: This is how investors’ money doubled
The stock has performed exceptionally well on Dalal Street over the past one year and has significantly outperformed broader market indices such as Nifty 50 and Sensex:
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Capital doubled: Today, the capital of the shareholders who invested in this share 12 months ago has doubled by 100%.
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Continuous improvement in quarterly results: The company has consistently recorded double-digit growth in its operating profit (EBITDA Margin), net profit and order execution pace in the last four quarters.
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Return on Equity (ROE): Due to better capital management and improvement in working capital cycle, both the ROE and ROCE of the company have reached better levels than the industry average.
Continued move towards new 52-week high: breakout on technical charts
A look at the technical analysis of the stock shows a clear ‘cup and handle’ and volume-based breakout after multi-year consolidation on the charts:
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Support of moving averages: The stock is trading well above all its important moving averages—20-day, 50-day, 100-day and 200-day exponential moving averages (EMA), confirming a strong bullish trend.
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Momentum Indicators: Both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are indicating continued entry of new buyers and strong accumulation despite being in the overbought zone.
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Trading Volume: The daily volume following the announcement of the historic order has been recorded at 3 to 4 times its 30 day average volume.
Big jump in financial position due to strong order book
Market analysts believe that for any company, receiving the largest order in its history is the biggest seal of approval on its production capacity, technical expertise and credibility. The execution of such large-scale projects directly benefits from economies of scale, which reduces production costs and increases net profit margins. Additionally, strong cash flow helps the company meet its capex (capital expenditure) from internal resources and debt dependence becomes negligible.
Strategy and Risk Management for Investors and Traders
It is important to adopt a prudent financial strategy while making new investments in stocks that are consistently trading at 52-week highs and doubling their money in 1 year. Although the fundamental outlook of the company is very strong, the possibility of minor profit booking and correction (pullback) cannot be ruled out after the sharp rally. If you are planning a new entry in this stock, buy gradually on dips instead of investing lump sum. Also, follow strict stop-loss and take full care of diversification of your portfolio.