3 Smallcap Stocks That Can Make Money Even In A Rising Market

With hopes of interest rates rising faster than expected easing a bit, markets have seen a significant rally. Here are a few mall cap stocks that you can buy as recommended by analysts at Prabhudas Lilladher.

Affle (India): Strong revenue growth

Aditi Patil - Research Associate, Prabhudas Lilladher has set a price target of Rs 1403 on the stock of Affle (India).

Affle reported strong revenue growth of 127.9% YoY (Ple: 118%). Organic business grew 45% YoY implying strong growth of 15% QoQ in Jampp (~36% of consolidated revenue). As per management, Affle is not much impacted by inflationary pressures faced by developed markets as it has negligible exposure to Europe and very low exposure to US, with 80% of exposure to emerging markets. "We believe that if advertising budgets tighten, spend will shift more towards digital advertising and ROI linked CPCU advertising model such as that of Affle. Affle is well positioned to grow higher than the industry led by its strong tech platform, deep verticalization and vernacular strategy, and ability to profitably scale up acquisitions," Patil has said in her report.

Affle India: target price of Rs 1403

"Our EPS estimates increase by ~6%/6% for FY23/24 led by increase in revenue estimates by 4%/5% in FY23/24 led by beat in Q1 and 53bps increase in margin estimates in FY24. We arrive at a DCF based target price of Rs. 1403 with implied earnings multiple of 54x on FY24EPS. The stock is trading at 42 times on FY24 EPS of Rs. 26 with Revenue/Normalized EPS CAGR of 38%/37% over FY22-24," the Prabhudas Lilladher report has said.

City Union Bank

Gaurav Jani, Research Analyst at Prabhudas Lilladher has recommended buying the stock of City Union Bank. "City Union Bank saw yet another a strong quarter with core earnings at Rs2.0bn beating estimates by 7.5% led by better NII and stronger AUCA recoveries. Stressed expsoure at Rs 45 bn is performing well and has reduced QoQ. Customers relating to 86% of OTR exposure have paid 1 or more EMI; by FY23 end ~60% of OTR would come out of restructuring. Spicejet has agreed to clear dues before Jun'23 with renewed terms also providing adequate collateral. As it is fully provided (Rs 970 mn), an upgrade could cushion balance sheet," the Prabhudas Lilladher report has said.

City Union Bank: Price target of Rs 190 on the stock

With comfort on asset quality, focus is back on growth and City Union Bank raised FY23 loan growth guidance from 12-15% to 15-18%. Drivers are in place for margin to improve and we expect NIM to enhance by 11bps YoY to 3.77% in FY23. "As we raise FY23/24 core earnings by average 9% we increase multiple from 1.7x to 1.9x. Retain BUY and revised target price from Rs 170 to Rs190," Prabhudas Lilladher has said in its report.

Buy Fortis Healthcare stock

Param Deasai, Research Analyst at Prabhudas Lilladher has recommended buying the stock of Fortis Healthcare for a price target of Rs 330. "Fortis Healthcare reported strong recovery in the quarter. Revenues improved 6% YoY (8% QoQ) to Rs.14.8bn vs our estimates of Rs.14.5bn. Hospital business showed strong revenue growth of 15% QoQ to Rs.11.9bn vs our estimates of Rs.11.3bn. Diagnostic business saw revenue de-growth of 27% YoY (13% QoQ) to Rs. 2.9bn vs our est. of Rs.3.2bn. Hospital occupancy improved to 65% vs 59% QoQ. Further ARPOB saw a healthy growth of 21% YoY and 4% QoQ to Rs.53.7K on better case and payor mix. Net debt marginally increased by Rs 360mn QoQ to Rs 5.85bn," the report said.

Positive on the stock of Fortis Healthcare

Prabhudas Lilladher remains positive on Fortis Healthcare and expects margin improvement across segments given 1) improving case mix in hospital segment with cost rationalization initiatives 2) traction in international patient's footfall and 3) increase in test volume on network expansion in diagnostics business. "We expect 14% Pre Ind as EBITDA CAGR over FY22-24E. At CMP, stock is trading at 17x EV/EBITDA on FY24E, adjusted for SRL stake. We broadly maintain our estimates and recommend 'Buy' rating with target price of Rs 330 post valuing diagnostics at 22x FY24E EV/EBITDA and hospitals at 20x FY24E EV/EBITDA. Resolution of legal issues would be a key additional trigger for re-rating," the brokerage has said.