This Aditya Birla Group stock rose 200% in 1 year; 660% in 5 years

Shares of Tanfac Industries, a joint sector company between Aditya Birla Group and Tamil Nadu Industrial Development Corporation (TIDCO), have delivered 200% returns to its shareholders in one year. From ₹195 in early January last year, the stock of Tanfac Industries has climbed to ₹584 today, generating 200% return in the last 12 months. In comparison, the benchmark index BSE Sensex rallied 23.2% during this period.

Investment of ₹1 lakh in Tanfac Industries stock at ₹195 apiece at the beginning of 2021 would have tripled to ₹3 lakh in just a year.

Formed in 1972, the chemical industry player is engaged in manufacturing of inorganic fluorine products such as hydrofluoric acid, sulphuric acid and aluminium fluoride, which have vital applications in industries such as aluminum smelting, petroleum refining, refrigerant gases, steel re-rolling, glass, ceramics, sugar, fertilisers, and heavy water.

Tanfac's stock outperformed its peer chemical industry companies such as Aarti Industries (52.5%), Deepak Nitrite (145%), Ganesh Benzoplast (15%), Kanchi Karpooram (77%), and Clean Science and Technology (64%), last year.

With a market capitalisation of ₹574.56 crore, Tanfac share price has gained 666% over the past five years and 160% in the last 3 years. In the last six months, the microcap stock rallied more than 100%, while it rose 19% during the past one month and 2.4% in the last five sessions.

On Thursday, Tanfac shares dropped after three days of consecutive gain. It has declined as much as 2.9% to hit an intraday low of ₹565. Despite today’s fall, the stock was trading higher than 5-day, 20-day, 50-day, 100-day, and 200-day moving averages.

There are a couple of key factors driving Tanfac's share price higher. The first one is its healthy financial performance as it has reported positive results for the last two consecutive quarters.

For the second quarter ended September 2021, the chemical manufacturing company had posted net profit of ₹10.02 crore as against ₹4.83 crore in the previous corresponding quarter, registering a growth of 110%. Sales more than doubled to ₹72.53 crore in Q2 FY22 compared to ₹34.29 crore during the previous quarter ended September 2020.

For the half year ended September 30, 2021, Tanfac Industries’ net profit surged 320% to ₹31.46 crore from ₹7.41 crore in the same period last year. Net sales grew by 160% to ₹162.80 crore from ₹62.03 crore in H1 FY21.

However, the company’s earnings are not the only reason behind the rally in Tanfac's stock. The strong demand for its specialty flouride product which is used in manufacturing of Favipiravir (a drug used for treatment of Covid-19 disease) and financial support from the Aditya Birla Group also augur well for the stock.

Meanwhile, moderate scale of operations as well as high competition from several mid to large size domestic manufacturers as well as from imports, especially from China, remain major concerns for the company. Going ahead, the impact of the Covid-19 pandemic on the business and vulnerability to exogenous factors such as raw material prices, forex rate volatility and adverse changes in environmental policies will also pose challenges for the company.