Shares of this small-cap stock, which specializes in producing high-quality camshafts for various automotive applications, surged 18 percent on Wednesday and delivered multibagger returns over the past six months. The rally comes amid increased demand for auto components and strong quarterly earnings performance, further boosting investor confidence.
Price Movement
During Wednesday’s trading session, Precision Camshafts Ltd’s share price reached an intra-day high of Rs.382.80 per share, rising 18.5 percent from its previous close of Rs.323.45 apiece. The price has since retreated and is currently trading at Rs.351.35 per share.
Over the past six months, the shares have delivered over 85 percent returns from the price of Rs.189.61 each on July 11.
What Happened
The rally in the stock is driven by several significant factors. A resurgence in demand for auto components has boosted production in the automotive sector, creating favorable conditions for growth. Additionally, the company’s latest quarterly earnings report highlighted notable improvements in sales and profitability, further attracting investor attention.
The decision by prominent investor Vijay Kedia to increase his stake in the company has also positively influenced market sentiment. The company’s strategic focus on expanding into electric mobility has added to its appeal. Efforts include establishing a dedicated EV plant and developing specialized components for the sector.
Moreover, its position as a global supplier of camshafts with a diverse product portfolio supports its relevance in the automotive supply chain. These developments have collectively contributed to sustained investor interest in the stock.
Capacity Enhancement
PCL has a production capacity of 11 million cast camshafts and 4 million machined camshafts annually, operating five manufacturing plants, two in Solapur, two in Nashik (India), one in Cunewalde (Germany), and one in Oosterhout (Netherlands).
It produces various camshaft types, including cast iron, ductile iron, hybrid, and assembled camshafts, serving segments like passenger vehicles, tractors, and locomotives. Current utilization rates for casting and machining are around 59.74 percent, providing room to increase production if demand rises.
At present, the foundry operates at 75-80 percent utilization, while machining is at 70-75 percent, reflecting a global reduction in demand. As market conditions improve in the coming quarters, utilization rates are anticipated to rise.
Additionally, the company plans to expand its captive solar energy capacity from 15 megawatts to 30 megawatts, further strengthening its renewable energy capabilities.
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Financials
In its latest financial update, the company reported a revenue of Rs.225.07 crore in Q2 FY25, falling nearly 11.5 percent from Rs.254.46 crore in Q2 FY24. Similarly, the company’s net profit decreased to Rs.8.40 crore from Rs.8.43 crore during the same period.
Ratio Analysis
In terms of return ratios, return on capital employed (ROCE) currently stands at 5.98 percent and return on equity (ROE) stands at 3.86 percent. The company has a low debt-to-equity ratio of 0.14 and a high current ratio of 2.94.
About the Company
Precision Camshafts Limited is a prominent manufacturer of camshafts and automotive components, established in 1992. The company offers a diverse range of products for various vehicles, including solutions for electric mobility. It has experienced significant growth in its market presence and share price recently
Written by – Siddesh S Raskar
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