Shah Metacorp, a B category smallcap stock, was the top weekly gainer with returns of 38%. The stock hit upper circuits on Wednesday and Friday to close at ₹4.60, surging from ₹3.33 a week earlier. Friday’s close marked a lifetime high for Shah Metacorp.
Shah Metacorp Makes Specialty Steel for Oil and Gas Sector
Shah Metacorp manufactures specialized steel products like seamless tubes and pipes used in the oil and gas industry. With global energy prices rising over the last year, demand for the company’s products has increased. This has reflected in its stock price.
The company has benefitted from high oil and gas prices as energy companies are investing more in exploration and production activities. They require specialized tubing and piping solutions that Shah Metacorp provides.
50% Returns in a Month, 65% in 6 Months
Shah Metacorp stock has been on an uptrend, returning over 50% in just the last month. The returns over the last 6 months are equally impressive at 65%.
The 1-year returns stand at 40% as well, marking a strong bull run for what was earlier a little-known smallcap company.
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Part of Broader Smallcap Rally
Shah Metacorp’s rally comes amidst a broader surge seen in smallcap and midcap stocks this year. The Nifty Smallcap 100 index has gained over 25% in 2022.
Smaller companies like Shah Metacorp are benefitting from India’s economic recovery, rise in capex cycle and favorable market conditions. Their earnings growth has beaten larger peers this year.
Higher risk appetite among investors on the back of ample liquidity has also lifted stocks like Shah Metacorp to record highs.
Outlook Positive but Valuations Stretched
The outlook remains positive for Shah Metacorp as higher oil prices globallly bode well for energy investments and demand for its products. However, the recent sharp run-up has also stretched its valuations.
At Friday’s record high of ₹4.60, the stock trades at a P/E ratio of nearly 48x based on its trailing twelve months earnings. That makes it expensive compared to larger metal & mining peers trading around 10-15x earnings.
Nonetheless, investors will likely focus on Shah Metacorp’s earnings growth rather than higher valuations in the near-term.