Fundamental analysis and Price Behavior after expiration of Lock-in period of SMJC

Sagarmatha Jalbidhyut Company Limited is a hydro-power company with the paid up capital of Rs. 1,173,200,000 and listed in NEPSE as SMJC. It was established in November 2015 in Kathmandu. SMJC together with its subsidiaries and jointly controlled entities has an installed gross generation capacity of over 18 MW.

Lets look at some of the fundamental indicators of SMJC in the last three fiscal years. Comparison of SMJC's fourth-quarter financial statements for FY 2080/81, FY 2081/82 and FY 2082/83 are shown in a table below:

As shown in the above table, SMJC reported a net profit of Rs. 49,971,193 in 4th quarter of FY 2080/81. The profit declined to Rs. 25,564,054 in FY 2081/82, before recovering to Rs. 44,387,814 in FY 2082/83. As EPS is affected by the net profit, it followed the same pattern. Net worth per share also decreased in FY 2081/82 and recovered in FY 2082/83. The decline in EPS during FY 2081/82 resulted in a significant increase in the P/E ratio to 233.59.

One of the important news during 4th quarter of FY 2082/83 was the expiry of the lock-in period on SMJC shares. The company published a notice stating that the lock-in period of its promoters, local residents of the project affected area and employees' shares, will expire on 16th Chaitra, 2082. The expiry meant that shares that had previously been restricted from trading could become available in the secondary market, increasing the potential supply of SMJC shares.

Increment of more than 85 Lakh share as floating shares would definitely affect market liquidity which in-turn pressurizes the supply and price fluctuation in the secondary market. After the locking period expires more than 25 Lakh shares has been transacted and half of the number could be from the recently opened shares. Recently the supply appears to be drying up, if we watch the daily volume in the floor sheet. So we could anticipate that SMJC gives a upward move in near future.