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Rahima Food's share price has soared nearly 140 per cent in less than two months on the Dhaka bourse despite a sharp decline in profits in the first nine months of FY25.
Following the unusual rally, the Dhaka Stock Exchange (DSE) issued a letter to the company, inquiring whether any undisclosed, price-sensitive information was driving the surge.
In reply, Rahima Food stated that there was no undisclosed information behind the recent jump in the share price and trade volume.
On June 15, the company's shares traded at Tk 68 each. By August 7, the price escalated to Tk 161.70 a share, pushing the company's price-to-earnings (P/E) ratio to 461.54, according to unaudited financial statements of the company.
The sector's average P/E ratio is just 21.86.
The DSE had issued another query in mid-July, when the share price reached Tk 115 each. The rally, however, continued. The stock exchange deemed the sharp rise unjustified, given the company's weak financials.
In the July-March period of FY25, Rahima Food's revenue fell nearly 48 per cent year-on-year to Tk 57 million, while profit dropped 69 per cent year-on-year to Tk 5.13 million.
Analysts note that an excessively high P/E ratio often signals that a stock may be overpriced relative to its fundamentals, making it vulnerable to sharp corrections if growth fails to meet expectations. In some cases, high P/E levels reflect speculative trading rather than genuine business prospects.
On Sunday, Rahima Food's share price stood at Tk 160 each, down 1.05 per cent from the previous trading session.
Meanwhile, Rahima Food Corporation in July suspended coconut oil production due to low market demand.
The CFO of the company told The FE that closing the operation was more profitable.
"We have suspended it [coconut oil production] temporarily. Currently, running this business is not profitable for us but we will resume it when we will be able to make profits," he said.
City Group acquired the company in 2016, which helped Rahima Food to return to production in 2022. The company paid a 10 per cent cash dividend for FY23 and FY24.
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