Penny Stocks as the name is indicative of are available at low prices, carry low m-cap and as aggressive investor class view them to offer higher return in a short span of time, they invest in them. But they are probably not the popular scrips which are easy to find. Also, whether you know it or not some of these stocks with sound fundamentals can also form part of your long term investment portfolio.
By fundamentally healthy or strong company, we mean the entity can carry out its business operations out of its share capital and reserves and is less dependent on outside debt. So, it turns out to be a more self-dependent concern and less risky bet for shareholders.
Likewise, we herein list some of the penny stocks based on good fundamentals i.e. with low debt to equity ratio, consistent revenues and increase in profits over time as well as those that are good at offering dividends.
Nagarjuna Agrichem Limited (NACL), the small cap company, established in the year 1994, from the pesticides and agrochemical space is currently priced at Rs. 73.35. The stock's 52 week low/ high has been Rs. 36/ 89. The company is into manufacturing of Agrochemical Active Ingredients.
The company has turned out to be a trustworthy entity within the farming segment and largely extracts revenue from the domestic market, despite exporting its product line to several nations.
NACL Industries' unaffected by the pandemic breakout has posted consistent revenue growth with Fy21 revenue at Rs. 1191 cr. as against Rs. 846 cr. Fy 2018. After an intermittent decline in net profit between FY17 and FY20, the company has reported Rs. 50 cr. net profit in Fy21 higher than Rs. 31 crore in Fy 2017.
Average dividend pay-out ratio for the 3-year time period has been 9.3%. The debt to equity has been maintained at 0.44, recording a consistent decline since 2018.
Other major positives of the company include robust supply chain, broad based product line, good clientele, sound financials and diversified geographical outreach.
International Conveyors Limited:
The company operates into 3 main segments including Conveyor Belting-wherein it manufactures and markets PVC conveyor belts, Wind Energy- as part of which the company generates, supply and sale wind power (electricity), and corporate segment-responsible for corporate, financing and administrative activities. The conveyor belts produced by the company are used to carry coal, cement etc. in underground mines. The company draws its major revenue from exports with clients served outside of the country such as Mosaic, BeltTech etc. While in India, the company caters to Shree Cement, Coal India, Tata Steel among others.
During the last 3 years, the revenues recorded a CAGR growth of 23.7%. While amid an increase in export orders, the company's revenue grew in Fy21 to Rs. 169 cr. as against Rs. 85 cr. in Fy19, logging consistent revenue growth.
Even profits recorded a CAGR growth of 42.8% in the last 3-years. After working on to reduce its debt, the company is now a debt free entity. The company's average dividend pay-out over the last 3-years stands at 18.6 percent and with improvement in financials, we can expect more consistency in dividend. For FY 2021, the company declared a dividend of 100% of Rs. 1 per share.
Talking about its core strength, steady order book, lower competition in the domestic market, a reputed client base are the key drivers facilitating the company's performance.
NBCC (India) Ltd:
The PSU company from the Infrastructure space is into project management consultancy, EPC and real estate. After a decline in net profit in Fy 2020, the company posted a steep surge in the net profit to Rs. 236 crore in Fy 21. Net profit for the September quarter of Fy22 more than doubled sequentially to Rs. 65.64 crore. The company's net sales also recorded a surge during the same period to Rs. 1302 crore sequentially.
The company is a debt free company for over the last 13 yrs. The PSU major has a strong track record of distributing dividends since 2007 and in Fy 2021 offered a dividend of 47%.
NBCC India has a solid track record for consistently paying dividends since 2007. The company will also be included in the list of entities for privatisation as the centre treads on to privatise or wind up all CPSEs in the 'non-strategic sectors' one by one.
This is another PSU company from the infra space that is into global engineering consultancy and an EPC entity. The company primarily offers project management services across sectors such as infra, solar and nuclear power, water and waste management, fertilisers and oil and gas.
The company's revenues in the FY 2021 stood at Rs. 3144 crore, declining from the previous FY as an impact of the pandemic outbreak. Over the last 3 years i.e. between 2018-2021, the company's revenue grew at a CAGR of 7%. The company however in the last 2 quarters has been consistently seeing a decline in revenue from operations.
On the net profit margin front, its 3-year average margin has been at 12.3 percent. Also, the company has a long standing track record of dividend payment, with Fy21 pay-out of 40% Rs. 2/ share as dividend, which makes it to a dividend yield of 2.77%. The 3-year average dividend is 61.9%.
This company that is classified as a Navratna entity is also a debt-free concern with cash surplus status.
As a recent development, the company is also foray into the green technology space as it has established an alliance with Chempolis, Finland for converting biomass to green fuels in the country.
Gujarat Mineral Development Corporation:
The mining and mineral processing concern is into producing lignite and fluorspar. Fluorspar of 2 grades offered by the company finds usage across industries such as steel, foundry flux, welding electrodes, aluminium etc. Besides, the company is also into power and mining projects.
Except for the last Fy21, wherein it posted a net loss of Rs. 41 crore, the company has never posted losses and in fact has maintained consistency despite seeing decline in profits over the period. In the previous Fy20, the company posted net profit of Rs. 202 crore.
Likewise, revenue has also seen a hit since Fy 2018.
Nevertheless, its debt to equity being zero can be a good bet as it offers more security to shareholders with less risk. Since 1997, the company has been giving out good dividends and for the last Fy, it declared a dividend rate of 10% or Rs. 0.2 per share.
Currently, the stock trades at an attractive P/B value of 0.56.
|Penny Stock||LTP||52 Week L/H||Debt to equity as of Fy21|
|NACL Industries||Rs. 73.35||Rs. 36/89||0.44|
|International Conveyors||Rs. 67.2||0.3|
|NBCC||Rs. 46.7||Rs. 26/60||0|
|Engineers India||Rs. 72.15||Rs. 67.65/93.3||0|
|Gujarat Mineral||Rs. 71.40||Rs. 45.3/83.35||0|
Note investing in penny stocks is prone to market risks and one needs to be cautious owing to the high risk involved. Neither the author, nor Greynium Information technologies Pvt Ltd would be responsible for losses incurred based on a decision made from this article.