Plaza Wires stock hits upper circuit: Should investors book profit or buy more?

Shares of Plaza Wires hit the upper circuit, surging 5 percent to Rs 112.86 on October 23. The stock has gained 109 percent from its IPO price of Rs 54, doubling investors’ wealth in just seven trading sessions. Earlier this month, the stock had listed on bourses at a 55 percent premium and now it is up more than 34 percent from the listing price of Rs 84.

According to Prashanth Tapse, Sr. VP Research Analyst at Mehta Equities Ltd, despite market volatility and fierce competition in a sector crowded with industry giants, Plaza Wires’ IPO proved a success, doubling investors’ returns. Post-listing, Plaza Wires’ shares consistently rose, driven by reasonable valuations and a performance gap between large and small-cap companies in the sector.

“We maintain our belief that the wires and cable segment will benefit from the government’s infrastructure-focused initiatives and expansion plans. With a preference for mid and small-cap stocks due to their higher growth potential, we recommend booking 50 percent of your holdings and retaining the rest for medium to long-term gains, while remaining optimistic about the sector’s long-term outlook,” Tapse said.

Plaza Wires IPO received a strong response from investors and recorded the highest-ever bidding by retail buyers in the mainboard space. The issue was subscribed 161 times from September 29 to October 5. Retail investors bid 374.81 times the allotted quota, qualified institutional investors 42.84 times, and high net-worth individuals 388.09 times.

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Plaza Wires demonstrates a robust business model and a solid order book, benefiting from favourable input prices, particularly in the case of copper, which is poised to enhance margins, according to Avinash Gorakshakar, Head of Research at ProfitMart Securities.

“With the entire cables and wires industry operating at full capacity due to strong demand, we anticipate Plaza Wires to exhibit significant growth potential, offering a promising 25% upside in the coming 12 months,” Gorakshakar said.

The Rs 71.28-crore IPO consisted of only a fresh issue of 1.3 crore shares and there was no offer-for-sale component. On the financial front, Plaza Wires’ net profit jumped 26 percent to Rs 7.51 crore for the year ended March 2023 from Rs 5.95 crore a year ago. Revenue from operations grew 3.2 percent to Rs 182.4 crore from Rs 176.7 crore in the same period.

Plaza Wires manufactures and sells wires, LT aluminium cables, and FMEG products under brands like Plaza Cables, Action Wires, and PCG. It has a unit in Himachal Pradesh’s Baddi, with a capacity of 1,200,000 coils per year.

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