The stock of this SME of electrical equipment has jumped 500% in two months

Shares of RMC Switchgears were stuck on the 5% upper circuit at Rs 264.25, also its record high on BSE on Friday at 10:05 am. The electrical equipment company’s stock was frozen in the upper circuit for the 41st consecutive trading day. Over the past two months, the stock has soared 500% from a level of Rs 44, according to BSE data.

RMC Switchgears is engaged in the manufacture of LV/HV distribution boxes and panels, junction boxes, power pillars, other power distribution devices, circuit protection switchgears, UV sheets PVC design and solid surface acrylic products.

RMC Switchgears operates in the SME segment under the “MT” group on BSE. BSE SME certificates which are listed in the “M” group (trading, clearing and settlement are carried out on a net basis) and those listed in the “MT” group (trading, clearing and settlement are carried out on a raw basis).

RMC primarily responds to tenders from various government DISCOM’s. As of May 31, 2022, RMC has an unexecuted backlog of approximately Rs 112.96 crore, or approximately 2.72 times FY22 revenue, providing strong revenue visibility. Additionally, the company was declared L1 for an order of Rs 236 crore from Maharashtra State Electricity Dist. Co.Ltd. Pending orders are expected to be filled in one to two years, suggesting viable revenue visibility in the short to medium term.

For the first half (April-September) of the current financial year 2022-23 (H1FY23), RMC reported an after-tax profit of Rs 6.14 crore, compared to Rs 0.47 crore in H1FY22. Operating income during the period increased by 224% year-on-year to Rs 58.03 crore from Rs 17.90 crore a year ago.

On October 21, RMC said that based on the rating assessment undertaken by Infomerics Valuation and Rating Private Limited, the company’s credit rating had been upgraded to IVR BB-/Stable.

The ratings assigned to RMC Switchgears’ banking facilities derive from the company’s long operating history under the management of experienced developers, a satisfactory order book position indicating revenue visibility with a reputable customer base.

In addition, the ratings also note an improvement in the company’s operating scale during FY22 and Q1FY23, coupled with a satisfactory capital structure and moderate debt protection measures. In addition, the company plans to issue new shares through a preferential allotment, which would further strengthen the company’s net position in the short term, the rating agency said.

These rating strengths are partially offset by its small scale of operation, past delays, tender-driven nature of the business, customer concentration exposure coupled with fund-intensive nature turnover of his operation, he added.

RMC has a low number of shares outstanding of 6.09 million as of September 30, 2022. The promoters held a 55.60% stake in the company. The remaining 44.40% belongs to individual shareholders (31.02%), legal persons (7.83%) and others (4.66%), according to data on the shareholding structure.