Over the past five trading sessions, Ahmedabad-based Pratham EPC Projects has surged by approximately 59 percent, reaching a closing price of Rs 179.8 (+10 percent) on April 16.
After making its debut on NSE Emerge on March 18, with a 51 percent premium of Rs 131, the stock has surged nearly 40 percent. This is the first EPC company to be listed in the SME segment. What could be the factors fuelling the growth of this Rs 241 crore market cap SME EPC company?
What has been driving the stock?
Pratham EPC is an engineering, procurement and construction company involved in projects spanning irrigation, power, industrial, water and oil & gas sectors. For the fiscal ended March 2023 it reported a revenue of Rs 50.20 crore against Rs 50.46 crore in FY2022 and Rs 30.58 crore in FY2021, according to the company's RHP (Red Herring Prospectus). Net profit for FY2023 was Rs 7.64 crore against Rs 4.41 crore for FY2022 and Rs 1.12 crore for FY2021.
The recent surge in stock price has been primarily fuelled by a significant order win. The stock soared nearly 20 percent on April 12 after the company secured a Rs 497 crore order, nearly double its current market cap of around Rs 241 crore and nearly 10 times its revenue in the last fiscal. At the time of listing the company had reported a work order of around Rs 406 crore.
Also read: Pratham EPC bags Rs 497-cr order, double the size of its MCap, stock zooms 20%
What is the new order win?
The awarded work order involves onshore and offshore crude oil pipelines in the Gulf of Khambhat and other fields of Gujarat, with an expected completion timeline of three years (36 months). "We are pleased to announce that the company has been awarded a work order exceeding the proposed amount of Rs 497 crore from Sun Petro Chemicals Private Limited, which is approximately 25 percent higher than initially stated Rs 406 crore in our prospectus," the company stated in a press release.
What is the potential of the stock?
While there are few analysts currently tracking the stock, Nirav Karkera, Head of Research at Fisdom, suggests that the enthusiasm for the stock stems from the recent order win. He believes that the successful completion of this order could pave the way for more opportunities of similar scale in the future, thus boosting the company's topline.
Sunny Agrawal, Head of Fundamental Research at SBI Securities, concurs, highlighting the strength of the company's order book, particularly in the oil & gas segment. He also notes the company's esteemed client list, which includes BPCL, IOC, and Gujarat Gas. Agrawal suggests that if Pratham EPC can execute its order book over the next two to three years it could potentially post a healthy profit.
Regarding investment potential, while most analysts declined to comment, they acknowledged the inherent risks associated with SME segment companies. They suggest that while many investors may prefer larger and mid-cap stocks within the EPC space for greater stability and liquidity, there may be some stocks with growth potential, especially due to the overall growth across companies in the EPC segment in both the near and long term.
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