Hello Sir,

Hope you are doing well.

I was recently looking at Dynacons Systems & Solutions and was spellbound by the way the company has grown over the years and the amazing returns delivered by the stock.

Since Sep’20, the stock is up ~40 times from 30 odd levels to around 1,200 odd levels.

While digging deeper in the company, I found some interesting details regarding actions taken by the promoters and will share details below to understand how can one screen for stocks which may end up performing well in future.

Investing is probabilistic and the idea is to invest in stocks where the probability of good returns might be higher.

The question is – How does one screen for such stocks?

 

Before that: On 18th Jan’25, we released a new stock recommendation under “Insider Bets“ subscription which is again based on Promoters’ actions.

Promoter is basically infusing capital and increasing stake when the stock is down 60% from peak. You can check the details HERE

 

Coming back to turnaround or potential multi-bagger opportunities, we believe one good way to screen for such stocks is as follows:

Look for Preferential allotment of warrants to Promoters in companies in which there’s been a decent correction in stock price (40-50% or more) and where major allocation is to Promoters

 

Let’s look at – Dynacons Systems & Solutions

  • If we look at historical numbers, Dynacons has been a very good performer in terms of YOY growth in sales and profits
  • In Jan’18, stock reached a high of 55 odd levels
  • Thereafter, due to the correction in small-mid cap space and covid-19 correction in Mar’20, the stock reached a low of 15 odd levels in Mar’20
  • While the stock was down 70% + between Jan’18 to Mar’20, company’s PAT increased from Rs 2 crore in FY 18 to Rs 6 crore in FY 20
  • As the market started recovering, stock also recovered to around 30 odd levels by Aug-Sep’20
  • On 27th Aug’20, the company announced that a meeting of Board of Directors will be held on 3rd Sep’20 to consider issuance of equity shares/warrants to Promoters and others on preferential basis
  • On 30th Sep’20, Board of Directors approved preferential issue of 35.20 lakh warrants at a price of Rs 28/- to promoters and relatives of promoters (very important promoter action in our view)
  • On 1st Oct’20, the stock was still trading around 30 odd levels. Thus, one could have invested in the stock around the same levels the promoters were investing at

Source: BSEINDIA

 

  • I believe, the entire allocation to Promoters and to the Relatives of Promoters was a significant event and probably indicated that Promoters were anticipating good performance ahead
  • As mentioned above, Dynacons was already performing quite well before the allocation and the performance improved further after the allocation
  • In FY 20, i.e., before the allocation the company reported Rs 328 crore sales and Rs 6 crore PAT
  • In FY 24, the company reported Rs 1,024 crore sales and Rs 54 crore PAT

Source: Screener

 

  • On 30th Sep’20 when the Board approved the Preferential allotment to Promoters at Rs 28, the stock was trading around 30 odd levels and currently it is trading around 1,200 odd levels

There might be many cases where the business and the stock may not have done well, post allotment of warrants to promoters during low phase. However, the idea is, screening for such stocks can be a good starting point for further research and to catch the turnaround stage early.

(End)

 

Disclaimer: This is not a recommendation to buy/sell any of the stocks mentioned above. The securities quoted are for illustration only and are not recommendatory.

 

Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/

 

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