Markets have now hit the 33,150 levels, which is just 2 per cent below its lifetime highs. Picking the best small cap stocks is never easy in a rising 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 are today available.
Granules India has a presence across the pharma spectrum from active pharmaceutical ingredients (API) to pharmaceutical formulation and finished dosages.
The company's manufacturing facilities have approval from the US and European regulatory authorities. We are recommending this small cap stock to buy in India at the current market price for a number of reasons.
Firstly, the company is laying a focus on finished dosages, which would add to margins and profitability in the coming years.
The company has filed for a number of ANDAs with the US FDA and once these approvals come through, it can begin launching these products in the US.
Expansion to benefit Granules India
Granules India plans a gradual expansion of its paracetamol facilities, Metformin and Guaifenes capacity. The Acquisition of Auctus will also lead to high growth in the API business.
The company has already begun selling OTC products, which should further boost margins in the coming months. All these initiatives are likely to fructify in the next few years, which is when the profit after tax is expected to grow substantially in line with revenue growth at the company. To be precise all these would factor in FY 2019-20.
Also read: Best midcap stocks to buy
Good financial performance of Granules India
Over the last few years, the financial performance of Granules India has been pretty decent. The company saw its profits rise from Rs 123 crores in FY 2016 to Rs 164.5 crores in the FY 2017.
From a 2-year perspective the profitability should rise further due to the expansion plans at the company, apart from the new ANDA filings, whose launches good boost growth and profitability.
We believe that the company could report an EPS of Rs 9 for FY 2018-19. This means the stock is trading at a p/e of just 14 times. The stock should rise and give returns of at least 30 per cent in the next two years. A great small cap stock to own.
Also read: Best largecap stocks to buy
Bodal Chemicals is a company that is engaged in the manufacture of dyestufff. Numbers for the quarter ending June 30, 2017 were not too great, however, going ahead there is reason to be optimistic.
The one reason for that is the huge capacity expansion that the company will undertake. For example, the dyestuff capacity would be expanded to 25,000 MTPA from the current 8,000 MTPA. The entire funding will take place through internal accruals.
Trion Chemicals, a 42 per cent owned associate of the company will produce a compound which is a disinfectant algicide and bactericide for swimming pools. The company also started a plant for Linear Alkhyl Benzene Sulphonic Acid, the liquid dyestuff capacity is also likely to be increased.
Bodal to reap rich dividends
Bodal Chemicals is likely to reap rich dividends in the coming years on account of the expansion. Apart from this the company is planning to enter new markets and secure new customers.
It also plans to maintain the debt to equity at the current levels of lower. For the first quarter ending June 30, 2017, the company reported an EPS that was lower than the previous quarter. However, from a two year perspective the stock looks cheap.
For example, the company can report an EPS of Rs 14 by 2018-19, which should take the p/e to around 11 times at the current market price.
A good small cap stock to hold from a two year perspective. Another good thing is that the promoters continue to maintain a very large shareholding of 64 per cent in the company. Bodal Chemicals shares is currently trading at Rs 170 on the National Stock Exchange. Check stock quote of Bodal here
Hindustan Media Ventures
Hindustan Media Ventures Ltd (HMVL), publishes the top Hindi language newspaper, "Hindustan". It is the No 1 newspaper in Bihar, Jharkhand and Uttarakhand and the number 2 newspaper in Uttar Pradesh.
The company has 20 printing locations with a staggering 152 editions. Hindustan, according to reports is the second largest read newspaper in the country and a very old newspaper brand.
The company has reported a staggering GAGR of 22 per cent in net profits in the last 4 years.
The good part for the company would be the solid growth rates that digital would bring to the company in the coming years, given that it also operates the livehindustan website. With data cheaper than ever before, the website would also drive traffic and growth for the company along with the print edition.
Hindustan Media is also focusing on better monetization of copies through higher yield and persistent investment in copies in core markets.
Hindustan Media: Cheapest stock on valuations
Hindustan Media is one of the cheapest stocks available in the print media. For the quarter ending Sept 30, 2017 the company reported an EPS of Rs 5.6.
The net profits for the said quarter was Rs 44 crores, which was lower than the previous quarter number of Rs 55 crores. The drop in net profits was largely on the back of demonetization. This led to the stock dropping sharply to Rs 230 levels. The drop now gives an opportunity to investors to grab it at lower levels. The company can report an EPS of Rs 24 for the full year 2017-18, which means the stock is trading at just 10 times one year forward earnings.
This is extremely cheap and if we apply a p/e of 15 times, the stock should give a price of Rs 360 at the very least. Remember, that we have central government elections in the next 18 months and this means, advertising revenues are going to surge. One is unlikely to get the stock so cheap.
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