Sharp stock rallies are common in the market, but still not as common as Manorama Industries’ recent surge. The stock nearly doubled in less than 2 months!
Its P/E ratio skyrocketed from 52x to 102x between March 15 & April 26, 2024 despite the company’s lacklustre ROCE of below 15%. So, what’s behind the frenzy?
Manorama produces specialty butters like cocoa butter equivalent (CBE), which is used in chocolate, confectionery and cosmetic products.
It sources exotic seeds from India and Africa & processes them into specialty butters at its Raipur plant. Ferrero Rocher, L’Oreal, and Hershey’s are among its key clients.
Once an agro-commodity trader, it pivoted in FY19 to CBE production. The shift helped it clock revenue & net profit growth of 31% & 39% per annum, respectively, between FY21-24.
To capitalise on the high demand for cocoa substitutes like CBE amid soaring prices, it recently doubled its capacity, resulting in the frenzy in its share.
The jump in valuation is astounding & the market is seemingly ignoring risks like high working capital needs and more. Our story has them in detail. Read it from the link below.