Prakash Steelage Ltd (PSL) shares continued their gravity-defying rally for the fourth straight week, surging 32% to close at fresh lifetime highs of ₹8.85 on Friday.
Steelage Shares Hit Upper Circuit 4 Days in a Row
The T-category penny stock hit upper circuit and notched up new 52-week highs for four back-to-back sessions last week as investors lapped up the shares. PSL stock has now surged a massive 60% over just the last month.
Strong quarterly results and a bonus issue announcement in late November lit the fire under Prakash Steelage shares. The stock has racked up staggering returns of 96% over six months and 75% in the last one year as financials improved.
What’s Behind the Euphoria in Penny Stocks?
Prakash Steelage is one of several penny stocks that have taken off over the last few months. These stocks seem to be prime targets for speculation by virtue of their low liquidity and prices.
Signs of financial turnaround, bonus issues, and stock splits appear to be key triggers fanning interest. With prices at multi-year lows, even a small upside capture can yield big percentage returns. This draws more punters and may create a self-fulfilling prophecy.
Fundamentals Catching Up Too
To be fair, the speculative frenzy also appears to be backed by fundamentals catching up for some penny stocks.
Prakash Steelage turned profitable in Q2 FY23 after years of losses. Revenue doubled on-year to ₹226 crore led by better steel prices. This turnaround has changed sentiment decisively.
Its bonus issue and stock split announcements in November added more fuel, signalling promoter confidence in a sustainable comeback.
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What Lies Ahead for Prakash Steelage?
Prakash Steelage shares have already surged multi-fold from March 2020 lows. At an EPS of ₹1.1 and PE ratio of 80, valuations appear quite stretched now.
With steel prices cooling from their peaks and global growth worries, margin pressure may reappear. That said, the turnaround and balance sheet repair do lend stability looking ahead.
While the breakneck rally may pause for breath, the stock may sustain at higher levels compared to its past. However, investors should be wary of speculative excesses and volatility in the near term.