Call them hidden gems as many stock analysts would like to call or term them as value picks. There are certain stocks that have the potential to rally, because of certain positives that might arise. We have identified some stocks that have the potential to generate returns, if all works well for them. Take a look at some such stocks.
On Diwali day this stock hit a new 52-week high and has fallen near 4 per cent, since that day. This is a value stock pick for many reasons. The company is a textile player, manufacturing a range of textiles and the Donear brand has been rather famous, if not very famous. There are a number of reasons to recommend the stock. One is that this company has real estate in Mumbai (Donear House), which is a 10-storey building in Mumbai's Andheri region. Now, we all know that real estate prices in Mumbai is one of the highest in the world. The company owns a tremendous asset in the forms of its building. Interestingly, half the building is used by the company and the remaining is leased out. The rental income for the company itself is around Rs 8 crores every year.
That is not the only reason to buy Donear
However, that is not the only reason to be buying Donear as a value pick or a hidden gem. Take a look at the company's financials and you see that the interest costs are reducing quarter on quarter. For example, the interest costs have fallen from Rs 8.07 crores in June 2015 to Rs 5.87 crores in June 2016. There are various other reasons to pick the stock. The promoter holding is as high as 75 per cent, which is always such a big positive. The other is that no shares of the promoters have been pledged.
A look at the fundamentals of the stock
Donear reported a net profit of Rs 2.15 crores for the quarter ending June 30, 2016. We believe that this is not bad considering that the company has a very small equity capital of Rs 10 crores. Going forward the cut in interest rates and the repayment of debt is going to push earnings higher. The rental income is also going to increase in the years to come. The stock ended trade at Rs 76 on the NSE.
This is another stock that has the potential to generate good returns for a number of reasons. Take a look at the quarterly numbers for June 2016. No sooner were the numbers declared the stock soared after net profits more than doubled. One reason for the surge was similar to the reason of Donear and that was interest costs fell sharply. The total income of the company also surged by a staggering 30 per cent to Rs 3,710 crore in Q1FY17 from Rs 2,845.10 crore in the year-ago period.
Gitanjali owns some of the finest brands like Gili, Nakshatra, Sangini, Asmi and is a sightholder of Debeers. The company, which was saddled with debt seems to be getting its feet back. For the quarter ending June 30, 2016, the company reported an EPS of Rs 2.20. Even if the company does an EPS of 9 for the full year, the stock is not expensive (p/e of just 8) at the current levels of Rs 73. We wish to emphasize that these kind of stocks are highly risky. Again a good value stock and a hidden gem at the current prices.
Pricol an auto ancillary company and we all know how auto ancillary share prices are soaring. The company manufacturers a range of two wheeler products, four wheeler products and tractor products. For example in the two wheeler segment the company manufacturers auto decompression units, fuel cocks, fuel feed pumps oil pumps. It also manufacturers a range of products for commercial vehicles etc.
The company has been managing to grow its revenues and net profits. For example the net profits which were just about Rs 2 crores in Sept 2015, has surged to Rs 19 crores for the quarter ending Sept 30, 2016. Going ahead there are a number of reasons the company's net profits may rise.
The company caters to many manufacturers and has presence in as many as 47 countries. As the company adds new products we expect the net profits. What is more interesting to note is that the company has a very small equity capital of just Rs 9 crores. A smart increase in net profits will lead to a surge in the share price.
Fundamentals of Pricol
Based on the quarter earnings of Sept 2016, the company reported an EPS of Rs 2.2. Even if the company does an EPS of Rs 10 in FY 2017-18, the stock should get a p/e of at least 20, which should take the price to Rs 200 at the very least. This makes the stock a good multibagger pick at the current levels. Pricol is a true gem at the current market price of Rs 115. We wish to emphasize that multibagger stocks or hidden gems have an element of risk, hence you must exercise some caution before buying these stocks.
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