Strong Price Performance and Market Outperformance
One 97 Communications has demonstrated impressive price appreciation over multiple time horizons. The stock has surged 8.45% in the past week compared to the Sensex’s modest 0.87% gain, and it has outpaced the benchmark by delivering a 51.70% return over the last year against the Sensex’s 7.32%. This remarkable performance extends further back, with a three-year return of 172.56%, significantly outperforming the Sensex’s 35.33% over the same period. Year-to-date, the stock has gained 34.35%, more than triple the benchmark’s 9.60% rise.
On the day in question, the stock hit a new 52-week high of ₹1,370.95, marking a fresh peak that underscores the bullish sentiment. It outperformed its sector by 3.8% and has been on a four-day consecutive gain streak, accumulating nearly 10% returns in that span. The stock’s price remains comfortably above all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling strong technical momentum.
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Robust Financial Fundamentals Supporting the Rally
The stock’s rise is underpinned by strong fundamental growth. One 97 Communications has achieved a compound annual growth rate (CAGR) of 20.29% in operating profits, reflecting consistent operational efficiency and profitability improvements. Net sales have expanded at an annual rate of 21.31%, signalling healthy top-line growth. The company’s recent quarterly results, declared on 25 Sep, were particularly encouraging, with operating profit increasing by 15.97%. The quarter recorded the highest net sales at ₹2,061 crore and the highest PBDIT at ₹141 crore, with an operating profit margin of 6.84%, the best in recent periods.
Institutional investors hold a significant 71.65% stake in the company, and their confidence appears to be growing, as evidenced by a 0.95% increase in their holdings over the previous quarter. This institutional backing often reflects a thorough analysis of the company’s fundamentals and prospects, lending further credibility to the stock’s upward trajectory.
Despite a recent decline in delivery volume by 67.48% compared to the five-day average, the stock remains liquid enough to support sizeable trades, with a trading capacity of approximately ₹35.56 crore based on 2% of the five-day average traded value. This liquidity ensures that the stock can accommodate investor interest without excessive volatility.
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Valuation and Risk Considerations
While the stock’s performance and fundamentals are strong, valuation metrics suggest caution. The company’s return on equity (ROE) stands at a modest 0.4, which is relatively low given the stock’s premium pricing. The price-to-book (P/B) ratio is elevated at 5.7, indicating that the stock trades at a significant premium compared to its peers’ historical averages. Moreover, the price-to-earnings-growth (PEG) ratio is notably high at 12.5, reflecting that the market has already priced in substantial growth expectations.
It is also worth noting that although profits have risen by 103.4% over the past year, the stock’s return of 51.70% suggests that the market is valuing the company aggressively. Investors should weigh these valuation factors against the company’s growth prospects and institutional support when considering their positions.
Conclusion
In summary, One 97 Communications Ltd’s share price rise on 01-Dec is driven by a combination of strong long-term growth in sales and operating profits, positive recent quarterly results, and sustained market outperformance relative to benchmarks. The stock’s technical strength, institutional backing, and liquidity further support the upward momentum. However, investors should remain mindful of the stock’s expensive valuation metrics, which imply high expectations for continued growth. Overall, the current price appreciation reflects confidence in the company’s fundamentals and market position, balanced by the need for cautious valuation appraisal.
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