Last 1 year the market has been tough. However, when market consolidates for a long period, it sets the base for the next bull run and it’s important one should be ready with good stocks in the portfolio for the bull run.
Today, we will look at G G Automotive Gears and how the performance of the company has turned around with great returns by the stock after a major corporate event.
This analysis can help identify such opportunities in future.
Before that: Here’s the list of new recommendations released by us in last few weeks:
- On 9th Oct’25, we released a new long term investment recommendation for Alpha and Alpha + members. It deals in Protective Gear with strong sector tailwinds. Co. has spent ~200 crore on capacity expansion in last 3 years and management is targeting 2x sales in 3 years. You can read about it by clicking HERE
- On 14th Sep’25, we released our 5th stock report under “Insider Bets“ subscription. Herein the company’s performance has turned around with strong growth in PAT in FY 25 and management is targeting PAT margin to improve 3x. You can read about it by clicking HERE
G G Automotive Gears case study
- From FY 18 to FY 23, the performance of the company wasn’t great
- During the period, sales increased from Rs 42 crore to Rs 77 crore; however, EBITDA remained flattish at around Rs 8 crore with dip in EBITDA margins from 19% to 10% and PBT declined from Rs 4 crore to Rs 2 crore
- However, since FY 23, there’s been a major turnaround in the performance of the company. Sales are up from Rs 77 crore to Rs 124 crore, EBITDA is up from Rs 8 crore to Rs 22 crore, EBITDA margins are up from 10% to 18% and PBT is up from Rs 2 crore to Rs 15 crore
- After remaining range bound in 20-35 price range for around 2 years, the stock has also done well since May’23 and has risen from 35 odd levels to around 280 now
Source: Screener
Question is, was there anything which could have alerted one to start tracking the stock and add to one’s watchlist before the significant improvement in performance and stock price happened?
- Yes, on 8th Sep’23, Board of Directors of the company approved issue of 4.25 lakh shares and 9.45 lakh warrants to Promoters at an issue price of Rs 60 per share
- Board also approved issue of 7.14 lakh warrants to Non-Promoters at Rs 60
- Thus, major allotment was to Promoters (13.7 lakh out of a total of 20.84) at 66% while their holding was only 33% at that time
- A significant increase in Promoter holding through open market purchase or major allotment to Promoters is always an interesting sign and calls for deeper analysis of such companies
- Promoter knows more than anyone else about the business operations and if they increase stake, many a times it could be because they are finding value or anticipating positive developments
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.
Hope you found the blog post useful and it added value to your investment decisions. Sign up for more interesting stock ideas and industry notes.
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.
Ekansh Mittal
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