Multibagger! Penny stock Hardwyn India surged 6592% in 5 years, up 955% in 3 years; should you invest?

Penny stock Hardwyn India has demonstrated exceptional performance for long-term investors. Looking back over 5 years, Hardwyn India has shown remarkable growth, increasing by a staggering 6592 percent from ₹0.50 in June 2019. Such substantial gains highlight its consistent and substantial value appreciation trajectory over the years, reflecting its potential as a high-return investment within the penny stock category.

Meanwhile, over the span of 3 years, starting from June 2021 when it traded at ₹3.17, the stock has surged by an impressive 955 percent.

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However, the stock witnessed some correction in the last 1 year.  Over the past year, it has fallen 37 percent, while the stock has lost almost 18 percent year-to-date. It has given negative returns in 4 of the 6 months so far. The scrip rose 16 percent in June so far, snapping after 4 straight months of losses since February 2024. It fell 35 percent in this period, declining 5 percent in May, 9 percent in April, 24 percent in March, and 1 percent in February. Meanwhile, it advanced 9 percent in January 2024.

The stock hit its record high of ₹51.77 on January 15, 2024 and 52-week low of ₹26.10 on June 5, 2024. Currently trading at ₹33.5, the stock is 35 percent away from the peak but has jumped over 28 percent from its 52-week low.

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About the firm

Hardwyn India Limited manufactures and trades in architectural hardware and glass fittings for residential and commercial structures under the Hardwyn brand in India. The company offers door closers, floor springs, glass patch fittings, point fixed architectural fittings, shower enclosure fittings, shower hinges, plastic profiles, mortise handles and locks, spider fittings, shower sliding systems, motion gate series, automatic and shower doors, stainless steel railings and balustrades, brass and zinc handles, cylindrical and furniture locks, telescopic channels, and electronic safes, as well as bathroom accessories and aluminum profile products. The company was formerly known as Garv Industries Limited and changed its name to Hardwyn India Limited in January 2020. Hardwyn India Limited was founded in 1965 and is based in New Delhi, India.

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Earnings

In the March quarter (Q4FY24), the net profit of the firm fell 12 percent year-on-year (YoY) to ₹3.29 crore from ₹3.73 crore in the same quarter last year. It also declined on a sequential basis from ₹4.1 crore in the December quarter.

Meanwhile, its total income rose 21 percent YoY to ₹37 crore in the quarter under review as against ₹30.5 crore in the same quarter last year. Meanwhile, in the previous quarter, its total income was ₹35.1 crore.

Overall for the financial year FY24, the company's net profit rose 8 percent to ₹9.75 crore from ₹9.03 crore in FY23. Its total income also grew 8 percent to ₹136 crore in FY24 from ₹125.77 crore in FY23.

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Brokerage view

ICICI Direct pointed out several strengths of Hardwyn India. The company operates with minimal debt, which ensures financial stability and flexibility. Over the past two years, Hardwyn India has consistently improved its annual net profits, reflecting effective operational management and increasing profitability. Another notable aspect is the absence of any promoter pledge, underscoring strong corporate governance and alignment of interests between stakeholders and shareholders. These factors collectively bolster Hardwyn India's position in the market, laying a solid foundation for potential growth and sustainable business operations.

Meanwhile, its only weakness, as per the brokerage, is declining net cash flow. The company is not able to generate net cash, it said.

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Investing in stocks, that boast lower market capitalisation, offers the potential for significant gains due to their affordability. However, this comes with inherent risks. Small-cap stocks often suffer from limited liquidity, resulting in fewer transactions compared to larger firms. Moreover, they frequently lack stringent financial reporting and oversight, making them susceptible to price manipulation and fraud.

Due to their liquidity constraints and oversight issues, small-cap stocks typically exhibit heightened volatility, amplifying investor risks. Therefore, conducting thorough research and implementing sound risk management strategies is crucial. This approach helps navigate the uncertainties associated with small-cap stocks effectively and minimise potential losses.

Disclaimer: This story is for educational purposes only. Please speak to an investment advisor before making any investment decisions.