2 Small Cap Stocks To Buy For Up To 31% Gains As Recommended By ICICI Securities

SGX Nifty is trading positive and as the Russia-Ukranian tensions seem to subside. Also Wall Street moved into the positive territory after the Fed said that though the central bank intends to raise interest rate but any decision shall be taken on a meeting by meeting basis

Amid such a scenario and after the earnings, ICICI Direct has given a 'Buy' on these stocks

1. Astra Microwave:

Buy for a target of Rs 250 i.e. upside of 20% considering the last price of Rs. 208

Astra Microwave (AMW) is poised for a significant scale-up in operations, with management expecting Rs30bn of order inflow over next three years. 70-80% of sales will be driven by domestic orders and hence will be at higher margin. Capex expenditure is not expected to be too much.

Brokerage's view on Astra Microwave:

The company has well accounted for the various projects and has moved past the development stage. Also the company has developed doppler weather radar.

Expects anti-drone systems order pipeline:

The basic TECHNOLOGY will be provided by DRDO. AMW is working on the radar and jammer system design of the ADS (in consultation with DRDO). The rest of the component designs will be taken from DRDO. The margins will be higher than typically BTP orders. Order opportunityis Rs30-50bn (soft kill and hard kill radars).

ADS will be in-house development; LaToThas been signed with DRDO. Investment for the ADS is expected to be Rs150mnStatus of Uttam (AESA) radar. AMW has received the pilot order for development of AAAU of Uttam radar from DRDO. The production will be distributed among two companies. LCA Mk 1 and other aircraft are looking to incorporate the radar.

Development cum production partner (DCPP) projects. Margins are fairly good compared to other segments. With strong RnD team in-house, AMW is optimising design to reduce costs and improve margins.

About Astra Microwave:

This is a telecommunications equipment entity into designing and manufacturing of RF and microwave super components and sub-systems used in the defence, civil and space communications systems.

2. Greenply Industries:

Q3Fy22 performance: The company has reported in line consolidated revenue growth of

23.7% with standalone India business growing at 20.3% YoY (volume growth of 11.4% YoY). Operating margin fell 208bps YoY to 10.2% primarily due to decline in gross margin in India business resulting in EBIDTA/PAT growth of 2.7%/19.3% YoY.

Buy Greenply for a target of Rs. 263 says ICICI Securities-Upside of 31%

"We maintain our BUY rating on the stock with Mar'23E target price of Rs263, set at 22x PER FY24E. Revenue growth of 23.7% YoY: GIL reported consolidated revenue growth of 23.7% YoY with standalone India operations growth of 20.3% YoY (plywood volumes +11.4% YoY; 4.3% CAGR over FY20-22) and subsidiary (primarily Gabon) growth of 58.4% YoY (-14.5% QoQ) on a tepid base", adds the brokerage.

Rationale for investment in the scrip:

Capacity expansion on track: GIL's management has stated that plywood plant in Lucknow is likely to become commercially operational by Q1FY23 and MDF plant is on track to be completed by Q4FY23. Besides, the company has invested Rs19mnfor 19% stake in Harpur Plywood Pvt Limited which shall supply plywood exclusively to GIL. It plans to fund all the planned capital expenditure through internal accrualsand debt. Net debt as of 31st December, 2021 stood at Rs1.2bn (D/E of 0.24x).

Target/ guidance given by the company management

Management stated it intends to gain India plywood volumes 5-7% higher than industry growth over the next few years and targets revenue growth of at least 15% YoY in FY23 with improved margin profile. MDF capex is on schedule and will commission by FY23-end whereas Lucknow plywood plant will be operational by Q1FY23.

Disclaimer:

The above mentioned stocks are taken from the report of ICICI Securities and are not our views. Stock markets in India are highly volatile, so be careful with any such investments.