Soaring inflation which led to several hikes in interest rates kept the market participants and India Inc. on the uncertain path in the recent past. However, data showed that select small cap stocks from across the sectors have managed to sail through smoothly in the March quarter to report over 100 per cent growth in their bottom lines.
Among the popular names, the consolidated net profit of Alembic Pharmaceuticals surged 596 per cent to Rs 152.60 crore in Q4FY23 against Rs 21.92 crore in the same quarter a year ago. On the other hand, gross sales of the company increased by 0.66 per cent to Rs 1,415.74 crore. Shares of Alembic Pharmaceuticals have declined over 21 per cent in the past one year. The scrip slipped to Rs 571.75 on May 9, 2023 from Rs 725.30 on May 9, 2022.
While sharing its views on Alembic Pharmaceuticals post Q4 results, B&K Securities in a report said, “Sales stood flat primarily due to 36 per cent YoY decline in the US business. Due to the challenging US market on account of continuous price erosion pressure, we maintain our ‘Hold’ rating on the stock with an unchanged target price of Rs 634.”
Tyre manufacturer Ceat reported a 429.50 per cent rise in net profit at Rs 133.70 crore. However, revenue of the company declined by nearly 10 per cent YoY during the quarter. According to Nuvama Institutional Equities, post a strong margin show in Q4FY23, the margin may remain in the broad range due to mixed input cost trends and a possible increase in competition intensity.
“We revise our target price to Rs 1,840. Considering limited upside potential, we downgrade CEAT to ‘Hold’. Shares of the company traded 1.54 per cent higher at Rs 1,730.20 in the afternoon trade on May 10.
The Jammu & Kashmir Bank (up 297.73 per cent), Just Dial (up 279.14 per cent), Spandana Sphoorty Financial (up 271.10 per cent), Mahindra Holidays & Resorts India (up 247.29 per cent), 5 Paisa Capital (up 227.44 per cent) also posted solid growth in their net profit during the quarter gone by.
Sharing its views on Spandana Sphoorty Financial, ICICI Securities in a report said, “Spandana Sphoorty’s Q4FY23 and FY23 operating performance is an indication of the new management’s successful execution of redefined business strategies and delivery as per guidance.”
The brokerage has a ‘Buy’ rating on ICICI Securities with a target price of Rs 815, indicating an upside of over 25 per cent from the current market price.
“Spandana has taken the opportunity to beef up its top- and mid-management teams, post the resignation of erstwhile MD in November 2021. It has hired total of 13 CXOs and 1 level below CXO in the past 12 months. Management’s stability along with the realigned business process would help it execute its Vision 2025 in an effective manner. The key parameters of Vision 2025 are: improving RoA to >4.5 per cent (>5 per cent in Q4FY23) and RoE to >20 per cent (14 per cent in Q4FY23) by March 2025,” ICICI Securities said.
There are also some cases where the net profit of the company ballooned due to one-time gains or exceptional gains. Blue Star, Andhra Paper, Den Networks, Benares Hotels, Som Distilleries and Breweries, Carborundum Universal, Welspun India, Bank of Maharashtra, Lloyds Metals, Anant Raj, IOL Chemicals and Pharma, Mold-Tek Technologies, Mahanagar Gas and Dhampur Sugar Mills also posted somewhere between 100 per cent and 200 per cent growth in their net profit for the quarter ended March 2023.
From the above list, Reliance Securities recently gave a ‘Buy’ call on Blue Star with a target price of Rs 1,770. Shares of the company traded 0.65 per cent down at Rs 1,415.90 in the afternoon trade on May 10.
“Consolidated revenue of Blue Star was below our estimate. Reported profit after tax up 195 per cent YoY due to exceptional gain of Rs 170 crore on account of sale of surplus land. We raise our revenue and PAT estimates by 15.7 per cent and 22.2 per cent for FY24 and by 26.1 per cent and 27.1 per cent for FY25 factoring market share gains, margin improvement from Sri City plant and PLI benefits, lower tax rate and healthy execution in the projects business.” the brokerage said.
Nuvama also has ‘Buy’ rating on Mahanagar Gas (MGL) with a target price of Rs 1,135. “We believe, MGL’s stock shall be re-rated as its valuation of 11 times FY24E PER is nearly one-third lower than IGL as it was perceived as a company unwilling to expand into newer geographies. Furthermore, we argue that CNG enjoys a strong moat vis-a-vis EVs, as well as CNG, remains 41 per cent and 23 per cent more competitive than petrol and diesel,” the brokerage said. Shares of MGL traded 0.22 per cent up at Rs 1,076.60 in the afternoon trade on Wednesday.
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