What if you had invested Rs 2000 every week in this steel manufacturing company?

Investing in equity stocks has always been a popular choice for individuals seeking to grow their wealth over time. However, when it comes to investing in equity stocks, investors have two options. They can choose to invest in a particular stock by investing regularly at fixed intervals, such as daily, weekly, monthly, or at any time during market hours. The second option is a lump sum investment, where the entire amount is invested at once. 

Each strategy has its own set of advantages and considerations.

If an investor chooses to invest regularly in a particular company, it can offer several benefits. As retail or salaried investors, they have the option to invest small amounts from their salary rather than investing a large sum at once. Given the inherent uncertainty of the market, if someone invests a substantial amount in one go and unfortunate news arrives, the potential for incurring significant losses is higher compared to investing regularly with smaller amounts.

Another advantage is that investors can increase their investment amount when they believe a particular stock is available at a significant discount, allowing them to take advantage of low prices. On the other hand, with lump sum investing, the investor has already allocated a substantial investment, leaving little opportunity to consider adding more funds to the same stock.

In this article, we will examine the scenario of an individual who invested Rs 2,000 per week or Rs 8,000 per month in this company over the past five years. We will analyse the returns they would have received during this period.

During the five-year period, a total amount of Rs 4.8 lakh was invested, resulting in the acquisition of approximately 8,797 units. As per the current market price of Rs 194 on the BSE, the investment value has reached approximately Rs 17 lakh, reflecting a remarkable return of 256%.

Let’s check in detail for a better understanding, the data presented below are on a monthly basis.

Company Overview

Sunflag Iron & Steel Company Ltd, established in 1984, is a subsidiary of the Sunflag Group. The company commenced its operations in 1989 as a producer of spring steel. Over time, Sunflag Iron & Steel has diversified its product offerings and currently specializes in the manufacturing of mild steel and alloy steel products.

The company produces a wide range of steel varieties, including carbon steel, free-cutting steels, semi-free-cutting steels, and more. It has expanded its presence and expertise in the steel industry since its inception.

Financial Performance

If we check the financials performance, in FY23 annual revenue experienced a substantial increase of 29%, rising from Rs 2698 Crore to Rs 3488 Crore. The operating profit of the company stands at Rs 446 Crore, accompanied by an operating profit margin of 13%. Furthermore, the net profit of the company amounts to Rs 1115 Crore. In this financial year company posted net profit which is almost 5 times the net profit of last year.

The company’s return on capital employed (ROCE) and return on equity (ROE) are reported as 11.8% and 8.80%, respectively.

In terms of ownership, the promoters hold 51.16% of the company’s shares, while foreign institutional investors (FIIs) and domestic institutional investors (DIIs) hold 0.88% and 0.04%, respectively. The remaining portion of 47.92% of the total shareholding is held by Public investors.

Investors should take note that the selected company is used based on our analysis and secondly to illustrate the computation behind this strategy. It is essential for investors to thoroughly evaluate the company’s past financial performance, future growth prospects, future plans, promoters, business models, management, valuations, and other relevant factors.