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 2019. 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.
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 210.
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 56, is near to its 52-week low. The shares are offering a dividend yield of 6 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 June 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.
This bank posted a record net profit of Rs 477.74 crores for the financial year 2018-19. This is pretty decent profit, given the difficult economic environment.
What is most important is that the Non Performing Assets [NPA] of Karnataka Bank also dropped during the course of 2018-19. The Gross Non Performing Assets of the Bank fell to 4.41 per cent as of March 31, 2019, from 4.92 per cent as on March 31, 2019.
The capital adequacy of the bank surged to 13.17 per cent, as against the mandated 9 per cent by the Reserve Bank of India. The deposits of the bank also advanced by 8.88 per cent during the course of the year.
Karnataka Bank: Cheap on valuations
Karnataka Bank is a great small cap stock to buy, also because it is cheap on valuations. For example, the stock is available at a price to book of 0.49 times.
The bank's stock is available at a p/e of just 6 times one year forward earnings. What is most interesting is that the shares are available with a dividend yield of 3.5 per cent, which is a big positive.
The shares of the company have now dipped to a near 52-week low of Rs 74. At the current price the stock is extremely cheap. The bank is turning more aggressive, especially when it comes to garnering deposits and pushing for credit growth. Buy the stock with a long term perspective in mind.
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 277. The company reported a set of numbers for the quarter ending March 31, 2019, which were not too encouraging.
The performance was largely hit due to the dual impact of new tariff order (NTO) and pre-emptive volume cut to improve ad volume.
The revenues for the quarter were down to Rs 165.7 crores. What was also surprising was the weakish set of numbers for the radio business. However, Digital revenues were robust and grew 24% YoY to Rs 19.5 crore.
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.
Federal Bank reported a good set of quarterly numbers for the 3-month period ending March 31, 2019.
Slippages continued to fall to and was placed at Rs 256 crore against Rs 426 crore in Q3FY19 and Rs 872 crore in Q4FY18.
There has been a trend of seeing elevated slippages in the corporate segment, slowing down considerably.
This would mean healthy growth for the bank going forward.
While slippages have been falling for the bank on one hand, on the other the bank has also been seeing healthy recovery. This has led to a drop in the Gross Non Performing assets of the bank to 2.92 per cent.
The bank may reported an EPS of Rs 11 by FY 2020-21 as asset quality improves. This means the stock is trading at a p/e of around 9 times, these earnings. If we value the bank at 15 times, a near 40 to 50 per cent appreciation in the stock cannot be rule out from the current levels. Federal Bank thus remains an interesting small cap stock at the current levels.
The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author owns shares in Jagran Prakashan as on the date of publishing the article.