Sybly Industries, earlier known as Sybly Spinning Mills, manufactures polyester yarn. This small-cap stock generated revenue of Rs77 crore over the past four quarters ended June 2016, down 6% from Rs82 crore reported for the same period a year ago. While the Ghaziabad-based company has reported rising sales, it reported a net profit of just Rs1 crore in the past four quarters ended June 2016 compared to Rs0.04 crore in the previous year.
The operating profit margin of the textiles manufacturer is abysmally low, ranging between 2%-5% over the past eight quarters. In the past, the stock has witnessed low-volume tading. On an average, over the one-year period ended May 2016, there were just about 50-60 trades in a day. The price movement was volatile, but remained range-bound. The sharp uptrend began from June 2016. Over the next three months, the number of trades shot up, averaging about 500 trades in a day. This rise in volume took the price up 201%, to a peak of Rs14.15 on 22 August 2016, from Rs4.7 on 30 May 2016. Taking a longer horizon, the price moved up 1235% to this peak from a low of just Rs1.06 on 28 March 2014. Over this period, sales have been flat and there has been no improvement in profits which could have warranted such a massive price rise. At the peak, the stock was trading 57 times its earnings. What has led to this massive price surge? As we write, the stock was down 21% on 24 August 2016 to Rs11.12 from the recent peak. Are the regulators watching?