Lockdown star: Vaibhav Global doubles wealth in 3 months, but is it still lucrative?

Source- Money Control 

Vaibhav Global, a company with a market-cap of little over Rs 4,000 crore rose to fresh 52-week high almost on a daily basis in the last 3 months. The stock price rallied nearly 100 percent from March 24 when the Nifty50 made a swing low of 7,511.

Vaibhav Global Limited is a multi-national electronic retailer, wholesaler, and manufacturer of fashion jewellery and lifestyle accessories. It reaches almost 100 million households through its TV Shopping channels – ShopLC in the US and The Jewellery Channel (TJC) in the UK.

The stock which hit a low of Rs 490 on March 24 rallied to Rs 1,259 on June 25 which translates into an upside of more than 150 percent. The momentum has certainly doubled the stock in a short period of time but high valuations and poor revenue growth make analysts cautious and advise investors to book profits.

Net profit of Vaibhav Global rose by 22 percent on a YoY basis to Rs 39.74 crore for the quarter ended March 2020. Sales rose by nearly 8 percent on a YoY basis to Rs 498.05 crore in the same period.The stock is trading at a premium valuation at this point. If we talk about the profit growth of the company, it is -9.11% over the last 5 years, 22% over the last 3 years and 7.06% in the last 1 year. The company is trading at a high PE of 31.77,” Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor told Moneycontrol.

“The company has shown poor revenue growth of 9.95% for the past 3 years. Its operating profit also decreased QoQ, where other income increased in the financial year of March 2020. The company possesses a stable growth history and manageable debt,” he said.

Garg is of the view that the company seems highly inefficient in case of asset management with high liquidity current ratio 2.37%. “Our recommendation will be to book the profit at current levels and makes a new position at a lower price,” he said.

Rahul Sharma, Research Head- Equity99 also advises investors to avoid fresh buying in Vaibhav Global. “Public who are holding stock from lower levels should opt for trail stop loss to keep the pockets happy,” he said.

Technical Take:

The stock has run up a lot in the short term, and traders will be better off taking some profits off the table, and hold in case they invested in the last three months, and for new investors, fresh positions should be avoided.

This counter is in a steady uptrend since the panic low of 551 registered in March 2020. Interestingly, for the last 3 months, this counter is steadily moving inside a narrow ascending channel with multiple touch points, suggest experts.As long as it sustains above the said channel one can remain optimistic and look for a continuation of the uptrend while a close below the said channel, whose support seems to be around 1200 levels can signal a trend reversal in favour of bears,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory,

Chartviewindia.in told Moneycontrol.

“Contrary to this a close above 1300 can extend the upswing towards 1450 levels. However, considering the 200% percent return it delivered in a short span of 4 months positional,” he said.

Mohammad further added that traders who are fortunate enough to have bought at lower levels shall consider booking profits and re-enter again on a close above 1300 whereas long term investors who want to ride the rally may put a stop below 1185 on closing basis. Nitin Shahi- Executive Director, Findoc is of the view that the stock crossed levels of Rs 1,200 in June, breaking its previous high of 1199. The stock has continued to hold above the levels of 1200.

“RSI on the daily chart, trading above levels of 70-75, shows overbought conditions in stock. But still, an investor can hold on to positions in Vaibhav Global with a strict stop loss of Rs 1150. Fresh positions are to be avoided,” he said.