2 Smallcap Stocks To Buy That Have The Potential To Rally From Current Levels

It's been a market where it is hard to predict the direction. Markets are beginning to be increasingly volatile as investors grapple with mouting geo-political tensions. Here are 2 stocks that you could buy if you are a long-term investor.

Greenply Industries

Broking firm, Anand Rathi has a buy call on the stock of Greenply Industries. According to Anand Rathi, there is a clear growth visibility improves and also an expansion is underway.

"The company is setting up greenfield MDF capacities (800 cu.mtrs. p.d., 240,000 p.a.) and in plywood (13.5m sq.mtrs. p.a.) in UP/Gujarat at Rs1.1bn/Rs5.6bn. Expected completion: Q4 FY22/Q4 FY23; commercial production the quarter following. On optimal utilisation within 2-3 years of commissioning, the revenue potential expected is Rs 2.5bn/Rs6bn," the brokerage has said.

Valuation and reasons for optimism on the Greenply Industries stock

"We like Greenply for its leading position in plywood. We introduce FY24e and anticipate 23%/37% revenue/earnings CAGRs over FY21-FY24. With the increased capacity to go live in FY23/FY24 and the overall outlook encouraging, we upgrade the stock to a Buy with a higher target price of Rs 257, 20 times FY24e earnings (earlier Rs 227, 20 times FY23e earnings)," the brokerage has said.

Balkrishna Industries - Robust demand across regions and products; maintaining a Buy

Broking firm, Anand Rathi is also upbeat on the stock of Balkrishna Industries. Balkrishna Industries has successfully focused on specialist segments in the tyres business such as agricultural, construction and industrial as well as earthmoving, port and mining, ATV, and gardening applications.

The company continued to register greater quarterly sales volumes on strong demand for its products across regions.

"Higher rubber, energy and freight costs impacted margins during the quarter. We continue to be positive on the back of strong demand across Europe and the Americas and on expected healthy volume growth. Accordingly, we maintain a Buy, at a lower target price of Rs 3,099 (30x FY24e)," the brokerage has said.

Consistent volume performance

Q3 volumes grew 18% y/y to 70,320 tonnes (though q/q, they fell 3%); 9M FY22: 211,676 tonnes, up 33% y/y. Revenues grew 35% y/y to Rs20.3bn (but q/q slid 1%). With strong demand continuing across products and regions, we expect volumes to be ~285,000 tonnes in FY22, while operating at nearly full capacity.

"The capacity expansion plan is on track, and we expect the additional capacity of 75,000 tonnes would be available by H2 FY23. With continued robustness in Agri and OHT segments in Europe and US, coupled with volume growth in India, we expect overall volume growth of 10% in FY23. The key risks that the brokerage sees for the company is less-than-expected volume growth in FY23 and FY24.

The shares of Balkrishna Industries was last seen trading at Rs 1976 on the National Stock Exchange.

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. The author and has family do not own any stocks mentioned above.