The Sensex and the Nifty are just a few per centage points away from record highs. It is time to look at small caps, which could beat the market in 2020. Picking the best small cap stocks is never easy in a falling market. However, we have picked some very good ones, which can generate good returns in the medium to long term. Take a look at some of the best small cap stocks that can be purchased. We wish to inform readers, that the markets in the next days are likely to be exceedingly volatile. So, buy into them, if you have a penchant for risk.
KNR Constructions is a good smallcap stock that is set to reap the benefits of strong execution capabilities and a robust order book position. The government emphasis and thrust on infra development would also provide a boost to KNR Constructions. The Company has a Portfolio of 5 HAM Projects worth Rs.60,491.7 Million (BPC).
Solid on BOT Projects
KNR constructions presently has 778 lane Kms Projects in various Indian states which include the southern states of Telangana, Karnataka and Kerala, as also the Northern states of Bihar.
Apart from this, it also has two Annuity based Projects & two oll based projects completed. As on Sept 30, 2019, the EPC Order book position was to the tune of Rs 5146 crores.
Apart from this KNR constructions has a proven track record of executing projects for almost two and half decades.
KNR Constructions: Improving financials
For the quarter ending Sept 30, 2019, the company put up a good show. Revenues at the company were up 31 per cent to Rs 5,462 million, as against Rs 4163 million in Q2 FY 2019.
Net profits for the quarter ending Sept 30, 2019 grew 56 per cent to Rs 701 million. The company's financials are expected to steadily improve on the back of solid order book and past track record of execution capabilities.
The EPS of 2020-21 could easily scale closer to Rs 22. Applying a price to earnings multiple of around 15 times, the stock has the potential to reach Rs 330 as against the current market price of Rs 290. Buy the small cap stock of KNR Constructions for decent returns.
Hindustan Zinc is the second largest zinc miner globally. In fact, it is the largest producer of integrated zinc and lead around the world. It is also the ninth largest producer of silver globally.
The company is looking at improving production in both lead-zinc and silver. Hindustan Zinc is looking at impproving production to 1.2 mtpa of zinc in the second half of this year from 1 mtpa. Similarly, it is looking to enhance production in silver, while focusing on silver rich deposits and enhanced recoveries.
In the next 2-3 years, Hindustan Zinc plans to become among the top 3 players of silver globally.
Hindustan Zinc: Zinc Prices may move higher
In the short to medium term we may see zinc prices moving higher. Some existing mines across the globe are already seeing a slowdown in mining activity. Year to date, China has seen a slowdown in production due to environmental issues. This should support prices.
Hindustan Zinc is also a cash rich company with net cash at $2.65 billion. It is also a zero debt company with a 3 year EBIDTA margin of 51.5%.
The good reason to buy the share of Hindustan Zinc is the dividend yield. We expect the company to declare a dividend of Rs 20 at least this year, taking the total dividend yield close to 8 per cent. In fact, the company is slated to declare dividends very shortly.
The stock is also trading at a p/e multiple of just 10 times, which makes it rather attractive at the current market price of Rs 201.
Jagran Prakashan is one of the top media houses in the country. It owns the Hindi Language newspaper "Dainik Jagran", as well Mumbai's leading English newspaper "Mid-day". It also owns Music Broadcast, which in turn owns Radio City.
There are many reasons to be buying the stock of Jagran Prakashan. The first is that the stock at Rs 64, is very near to its 52-week low. The shares are offering a dividend yield of 5.5 per cent.
Another important reason to be buying Jagran Prakashan is that newsprint prices have been soft, which should benefit the company in the next few quarters.
In the digital space, the company has seen a solid 30 per cent growth for the quarter ending Sept 30, 2019. Unique users surged to 56 million, a growth of 35 per cent over the previous period. The net profits at the MBL, which is a subsidiary that manages radio City has also been healthy at 11 per cent.
Jagran Prakashan: Good value
Jagran Prakashan remains an investor friendly company and has undertaken buybacks and regular dividends and buybacks.
The stock is available at a price to earnings ratio of just under times 10 times one year forward earnings.
There remains immense potential in the stock of the company. The company also has decent cash on hand and low debt, which is not bad. Investments held at Jagran are also pretty decent around Rs 274 crores.
The only worry for media stocks at the moment is that government spending through advertisements maybe restricted due to budgetary constraints. Also, there maybe concerns on advertisement spending from the auto and the real estate sector.
DB Corp publishes the popular ‘Dainik Bhaskar' newspaper, which is the world's third largest circulated newspaper. In fact, in India the Dainik Bhaskar group is the country's largest urban newspaper group.
As per the Audit Bureau Of Circulation, Jan to June 2019 data, Dainik Bhaskar is the largest circulated daily in India.
The company also publishes the Divya Bhaskar, which is a close No 2 circulated newspaper in Gujarat. DB Corp also owns 94.3 MY FM which is a leader in states like Madhya Pradesh, Chhattisgarh and Rajasthan and largest network in Chandigarh, Punjab and Haryana.
DB Corp: Good track record of growth
Over the last 5-years, DB Corp has seen its revenues grow at a compounded annual growth rate of 14 per cent. The net profits too have grown and over the last 12 years, has seen a compounded annual growth rate of 14.5 per cent.
The return on capital employed too has been good over the years and in FY 2019 it was placed at 22 per cent. Over the last few quarters, the newsprint industry has been hit on account of the economic slowdown, largely by way of advertisement spends.
However, the company has managed to do reasonably well in an adverse economic growth environment. For FY 2019, the company reported an EPS of Rs 15.23, which discounts the stock price of Rs 140 at around 9 times.
For FY 2020-21, the company can easily grow its EPS to Rs 18, as economic growth gathers pace, which should result in a p/e of around 8 times. Reasonably valuing the stock at around 12 times could take this small cap stock to Rs 200 or more.
TV Today Network
TV Today network runs the popular channels namely, Aaj Tak (Hindi), India Today Television (English), Aajtak Tez (Hindi) etc.
Apart from this it also runs the radio business and digital business. The shares of the company have slumped from 52-week high levels of Rs 489 to the current levels of Rs 250.
Encouraging performance in the next year
The company is likely to report a good set of numbers for 2019-20, given that we had elections that were just complete and better results would be reflected in the forthcoming quarters. Apart from this the Delhi elections could also boost revenues and profits in 2019-20.
TV Today is also looking at demerging its radio business. Earlier, it had plans to sell the radio business, but, did not receive the approval from the said authorities. TV Today Network is the leader among Hindi newschannels and is also a good cash rich company, with almost negligible debt on its books.
We believe that the company should do well in the years to come, given its strong brand equity. The digital business is also expected to do well. TV Today is a good small cap stock to buy, if you have a medium term perspective in mind.
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