3 Smallcap Stocks To Buy For Upto 35% Returns

Here are some stocks that are suggested as a "buy" from broking firm Anand Rathi. Among these stocks include names like Granules India, Go Fashion and Indoco Remedies.

Go Fashion: Target price of Rs 1463

Broking firm, Anand Rathi has a price target of Rs 1463 on the stock of Go Fashion, which is an upside of 35% from current levels of Rs 1080. "Its cluster-based store-expansion model has led to revenue cannibalisation at individual store level thus impacting SSSG and volume growth. On same-cluster sales growth, volume growth was 11% y/y. Management aims at 4-5% SSSG volume growth. It intends to bring down inventory days to 90(from 120 now). Network expansion continued; it added 35 in Q3. We reduced our FY24e/25e sales ~6.5%/8% because of slightly lower volume growth. The stock price has fallen 20%+ in the last 3 months. We upgrade our rating to Buy with a target price of Rs 1,463 on 23x FY25e EV/EBITDA," Anand Rathi has said in its report.

 

Buy Granules India, says Anand Rathi

Anand Rathi has placed a "buy" call on the stock of Granules India, with a price target of Rs 370. The current market price of the stock is Rs 281, which implies an upisde of 31%.

Driven by good API sales (paracetamol), Granules India reported healthy Rs11.5bn Q3 revenue (up 15% y/y). More sales of low-margin paracetamol API led to the gross margin shrinking 140bps q/q. With most expenses continuing sequentially, the EBITDA margin contracted 93bps to 20.2%. Higher interest and depreciation costs led to net profit growing only 23% y/y to Rs1.3bn. Market-share gains and growth are expected from the recent launches, while backward integration would boost gross margins. After the recent drop in the stock, it trades at attractive valuations of 13x/11x FY24e/FY25e EPS. Hence, we upgrade our rating to a Buy, with an unchanged target price of Rs 370 (14x FY25e EPS)," Anand Rathi has said in a report.

Indoco Remedies: Buy with a price target of Rs 440

Another stock that Anand Rathi has a "buy" call is the stock of Indoco Remedies. The brokerage has set a target price of Rs 440 on the stock, as against the current market price of Rs 338. 

Backed by good formulations growth in regulated markets (40% y/y) and in India (12% y/y), Indoco's Q3 FY23 revenue grew 12% y/y to Rs4 bn. The gross margin contracted 320bps q/q to 67%, which resulted in a weaker (only 15.6%) EBITDA margin. PAT fell 15% y/y to Rs282m.

Excluding the Rs120m MtM losses included in the top-line, sales grew <15% y/y, the EBITDA margin was 18% and PAT grew 22% (Rs401m). The healthy contribution from India and the EU, and launches in the US, are the growth triggers and we expect 14%/21% revenue/PAT
CAGRs over FY22-25. We maintain a Buy rating on the stock with a lower target price of Rs 440, valuing it at 15x FY25e EPS," the brokerage has said.

Disclaimer

The stocks have been picked from the brokerage reports of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.