6 Smallcap Stocks Are Top Picks In October; PNC Infra, Kirloskar Brothers, JTL Ind In List, 9-20% Rise Seen

The Indian market has outperformed the global and other emerging markets in the last six months by a notable margin and the structural trend for the Indian equity market continues to remain positive, said brokerage Axis Securities in its research note.

Last month, small-caps witnessed exponential growth in their stocks. For October 2023, the brokerage likes a list of six stocks namely Kirloskar Brothers, JTL Industries, CIE Automotive India, CCL Products, CreditAccess Grameen, and PNC Infratech.

These stocks have the potential to rise in the range of 9% to 20% in the near term. Here's what Axis Securities highlighted:

Kirloskar Brothers:

Axis Securities' recommendation on the stock is supported by a) Robust improvement in the company's order book, b) Increasing revenue contribution from the Services segment, c) Restructuring of business activities resulting in improving ROE and ROCE (to 21% and 26.4% respectively) and operating margins (by 190 bps to 12.6% by FY25).

It added, "At the current CMP, the stock looks attractive at 17x 1 Yr-Fwd consensus PE. Given the above-mentioned growth drivers, we value the company at a revised 19x on FY25 earnings to arrive at an upgraded Target Price of Rs 975/share, implying an upside of 15% from the current levels backed by consistent business performance in the last couple of quarters."

From the current price level of Rs 885.80 apiece on BSE, the stock is expected to rise by over 9% in the near term.

JTL Industries:

With the phase-wise volume expansion progress, Axis Securities model Revenue/EBITDA/PAT CAGR of 46%/45%/51% over FY23/25E. The company issued 8.48 crore bonus shares (FV Rs 2 each) on 25th Sep'23. It added, "We now increase our P/E ratio from 22x to 23x as the government capex and infrastructure growth story continues. We arrive at our new TP of Rs 265 (Earlier target of Rs 470 i.e. Rs 235 post bonus issue is achieved)."

JTL shares are seen to rise over 10% from their current price level of Rs 237.85 apiece on BSE as of October 6, 2023.

CIE Automotive India:

Axis Securities continues to like the company's growth story driven by (a) Operational Performance and Focus on building an EV product portfolio (b) a Healthy order-book and steady growth in Indian operations (c) Strong FCF generations and negligible debt on the balance sheet (d) capacity building to meet demand from India OEM's. The growth trajectory in EU operations is expected to remain flat (decline in demand led by high-interest rates by Central Banks in EU and USA) in CY24 and recovery is expected by management post that.

Based on strong fundamentals and ability to generate FCFs, Axis Securities said, "we value the company at a 1-year Forward PE multiple of 24x in Indian operations (aided by overall industry growth and demand backed capacity expansions) and 10x on moderate European operational earningsJun'25 EPS, thereby arriving at our SOTP-based TP of Rs 585/share."

This small-cap stock hence has the potential for a 19.44% upside in the near term compared to its price level of Rs 471.25 apiece on BSE on October 6th.

CCL Products:

The brokerage remains positive on CCL Products given: 1) Strong footing in the International markets as it continues to gain market share and access new business, 2) Cost-efficient business model; 3) Doubling the capacity from 38,500 MT in FY22 to ~77,000 MT by FY25 across Vietnam and India; 4) Capacity addition in the value-added products (FDC and small packs) in Vietnam, and 5) Foray into high-margin branded retail business (Continental Coffee, Plant-based meat protein).

It has set a target price of Rs 750 on CCL Products, which is an upside of nearly 14% from the current price level of Rs 645.75 apiece that was recorded on October 6th on BSE.

CreditAccess Grameen:

Axis Securities prefers CAGrameen amongst the microfinanciers, despite its premium valuations, as the company remains well-poised to deliver superior performance over the medium to long term.

This will be supported by (a) a Strong rural presence and focus, (b) a Customercentric approach, (c) Robust technology infrastructure, (d) a Strong Risk Management Framework and (e) Adequate capitalization. Despite a strong show in Q1FY24, the management has retained its earlier guidance.
However, we expect some upward revision in the management's guidance across most parameters (GLP growth, NIMs and RoA/RoE).

"We maintain our BUY recommendation with a revised target price of Rs 1,600/share. We value CAGrameen at 3.2x FY25E BV," the brokerage said. This would be a nearly 18% upside from the current price level of Rs 1,315.95 apiece that was recorded on BSE after market hours of October 6.

PNC Infratech:

The brokerage pointed out that the company's management has also indicated that the intensity of competition for high-value projects has decreased and that most awards are expected to be completed by the NHAI by Q3FY24 before the onset of the General election in FY24

Considering its strong and diversified order book position, healthy bidding pipeline, new order inflows, emerging opportunities in the construction space, the company's efficient and timely execution and strong financial credence, Axis Securities expects PNCIL to report Revenue/EBITDA/APAT CAGR of 12%/11%/13% respectively over FY23-FY25E.

Hence, the brokerage has set a target price of Rs 425, which is an upside of 13% from its current price level of Rs 370.75 apiece witnessed on October 6th on BSE.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.