Multibagger stock: Patel Engineering spiked over 300% in a year, delivered nearly 800% returns in 4 years

Estimated read time 14 min read

Such turnarounds often serve as compelling narratives of resilience, strategy refinement, and investor optimism. Patel Engineering, one of the major infrastructure and construction companies, was one such stock in this regard. 

After experiencing persistent selling pressure from January 2022 to February 2023, resulting in a 50% decline, the stock reversed its trajectory in the subsequent months and has since maintained a steady upward trajectory.

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Over the past 12 months, the stock has surged from 14.95 per share to its current trading price of 63.10, delivering a return of 322%. In February, it reached a new seven-year high of 79 per share. This fabulous performance can be attributed to the company’s robust order wins in recent months. 

Taking the stock’s March 2020 low of 7.10 apiece, the stock is currently trading with a gain of 788%. 

Patel Engineering Limited, established in 1949 and headquartered in Mumbai, is a renowned player in the civil engineering construction sector. The company specialises in constructing highways, bridges, tunnels, dams, airports, and various other infrastructure projects.

On March 02, the company secured a joint venture contract, with its share amounting to Rs. 267.93 crore out of the total order value of Rs. 525.36 crore. This contract was awarded by the Irrigation & CAD Department of the Government of Telangana for constructing a reinforced cement concrete (RCC) protection wall.

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In January, the company, in collaboration with its JV partner, was awarded letters of award for projects involving the construction of a pipeline distribution network for the Nira Deoghar Right Bank Main Canal from Km 66 to Km 76 and from Km 77 to Km 87 by the Maharashtra Krishna Valley Development Corporation, Pune. These projects, for which the company holds a 40% stake in the JV, amount to 174.57 crore, as per the company’s regulatory filing. 

Financial Performance

In the December quarter, the company showcased a decent financial performance, with its revenue from operations witnessing a growth of 13.23% YoY to reach 1,052 crore. The operating profit stood at 142 crore, slightly higher than the 140 crore reported in Q3 FY23.

Moreover, the company successfully reduced its finance costs during the quarter to 87 crore from 102 crore in Q3 FY23. This strategic move contributed to the company’s bottom line, as it reported a net profit of 43 crore, marking a significant surge of 100% compared to the 21 crore net profit recorded in the corresponding period last year.

Also Read: Top 5 multi-bagger stocks offering growth, value and momentum

Company outlook

Looking ahead, the company is prioritising the reduction of the Debt/EBITDA to enhance profitability, leveraging its large land bank and other non-core assets for debt reduction. 

The company has already implemented efforts to monetise non-core assets for debt reduction, which are expected to continue in the future. The company focuses on niche segments such as hydroelectric, tunneling, and irrigation where competition is low, and margins are higher.

Also Read: NHAI reports highest-ever highway construction in FY24

The Government of India’s continued emphasis on infrastructure development, as reflected in the FY25 interim budget allocation of 11.11 lakh crore, bodes well for infrastructure and construction companies like Patel Engineering.

With a substantial order book exceeding 19,000 crore (including L1 orders), at the end of Q3FY24, the company enjoys robust visibility in future earnings, as per the company’s December quarter earnings report. 


Disclaimer: We advise investors to check with certified experts before taking any investment decisions.

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Published: 03 Apr 2024, 01:22 PM IST

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