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5 Lowest Value Small Capital Stocks To Add To Your Watchlist -By ASC


Historically, small -cap stocks have outperformed during the economic recovery.

Want to invest in the next Amazon, Titan or Bajaj Finserv?

Then you definitely need to explore your options in small -cap stocks.

Now you may be asking … why are small -cap stocks a good investment?

Historically, small -cap stocks have outperformed during the economic recovery. This is happening now because the economy is now in a recovery mode. The full value chain across sectors including small capital companies is expected to benefit.

Small -cap stocks have been known to generate over 100x the return on their original value in some cases. Investors who have a desire to take high risks and want to make multibagger returns can consider investing in small -cap stocks.

So, could 2022 be the year where you focus on building your small -cap stock portfolio? Maybe, yes.

To put things in perspective, there are over 4,500 small -cap stocks listed on the Indian stock exchange. If some of them are undervalued, then it’s just icing on the cake.

Here is a list of the top 5 undervalued small stocks you should add to your watchlist.

#1 Den Network

Good news awaits if you want to invest in the media and entertainment (M&E) segment as a strong revival will take place in financial year 2022.

Some of the key factors driving growth are favorable regulation, technological innovation and emerging investment opportunities in the cable broadcasting and TV markets.

This puts Den Networks, one of the leading cable TV distribution companies in India, as a strong competitor in the list of the most sought after undervalued small -cap stocks for 2022 to own in your cat.

It currently has a market capitalization of Rs 1,770 crore with its shares trading at Rs 36.9 each -. Price to earnings (PE) is at a low of 9.2 while the price to book value (PB) ratio is 0.6, well below the M&E industry benchmark.

Founded in 2007 and led by an experienced management team, Den Networks is a company poised for long -term growth.

With an active expansion plan, the company is diversifying to provide Internet Service Providers (ISPs) across India for broadband internet services. It currently operates across 500+ cities/towns in 13 states in the country.

Solid support from the parent company allows Den to focus on the next frontier in the area of ​​growth. This includes the creation of regional content for the Level 2 and Level 3 markets.

The goal is to be able to bridge the current demand-supply gap in this regional market which has resulted in this positive growth trajectory.

Proof of the pudding lies in profit growth for Den Networks. In financial year 2021, it jumped to 184.9% despite experiencing epidemic disruptions. The profit after tax (PAT) of Rs 2,459 m comes from its strong position in Hindi.

On the back of a strong balance sheet, Den Networks recorded gross sales of Rs 1,240 crore and reduced its gross debt from Rs 2,13.35 crore in fiscal year 2020 to zero in financial year 2021.

Although the return on capital employed (ROCE) was low at 2.1% over the past 3 years, the company managed to maintain a healthy position with a current ratio of 4.7.

#2 Sandesh

Here is another undervalued small -cap stock from the media and entertainment industry.

Founded in 1923, Sandesh has a market capitalization of Rs 570 crore. The company is now the largest and most influential media house in Gujarat.

Sandesh shares traded at a high of Rs 759.6 each – with a PE of 7.2 well below the 3 -year average industry PE ratio of 15.8.

The PB ratio was at 0.6 while the industry benchmark was 54.5 in the remaining twelve months.

The company initially started as a Gujarati daily newspaper. It has subsequently penetrated various other branches of the media and entertainment industry including television channels, magazines, OOH, and digital media.

As of March 2022, the company’s promoter holdings remained unchanged at 74.8% which has given the company direction to make its digital footprint more robust.

The company also improved its EBIDTA from Rs 8,120 crore to Rs 12,220 crore in financial year 2021 by improving its return from treasury operations.

Currently, Sandesh has little or no debt on its books and has maintained a healthy liquidity position. A strong financial risk profile characterized by a comfortable capital structure indicates a healthy future profit that can be expected for the company.

Profit growth rose to 53% last year which has helped earn a place for Sandesh in our list of top 5 undervalued small cap stocks.

#3 Indian Human Industry

A flagship company of the Man Group, Man Industries India is one of India’s leading manufacturers and exporters of large diameter carbon steel line pipes.

Founded over 25 years ago, the company occupies a dominant position in the plumbing segment. It is an approved vendor for major domestic and international oil and gas facilities.

Man Industries has a current market capitalization of Rs 530 crore. PE was at 5.3 and the PB ratio hovered at 0.6. Both are well below the industry average of 31.5 and 2.9 respectively.

The stock is currently trading at a high of Rs 77.6 -. The share price fell 17% from yesterday’s highest price of Rs 89.5.

While organizers holdings decreased to 44.7%, the company has a strong leadership team at its helm.

Man Industries continues to focus on leveraging existing capabilities to drive overall growth for the organization. The company has provided new manufacturing facilities with advanced technology nationwide to increase revenue in fiscal year 2022.

Man Industries has proactively focused on higher ticket value projects in 2022 and has also ventured beyond its core business activities by establishing a subsidiary in real estate.

Global demand for steel pipes is increasing. The industry is expected to reach a CAGR of 6.2% by 2027. Domestic demand is also picking up again with the Indian government announcing the expansion of the natural gas grid from 18,000 kilometers (km) to 34,500 km.

Man Industries has increased its cash flow in financial year 2021. The company also recorded revenue growth of 18.9% in financial year 2021 despite facing ongoing challenges posed by the outbreak.

Earnings before interest, tax, depreciation and amortization (EBITDA) showed an increase of 27.8% year -on -year (YoY) while PAT recorded a jump of 81.7% as per the results of the third quarter of financial year 2022.

All of this points to the fact that Man Industries has consistently maintained a healthy financial risk profile which makes it a worthy entry in the list of the top 5 undervalued minor stocks to watch for the year.

#4 Kirloskar Industry

The next participant in the list of undervalued small -cap stocks is Kirloskar Industries, a name synonymous with wind power generation in India.

It is a wholly -owned subsidiary of the 130 -year -old Kirloskar Group, a company that has played a key role in driving India’s economic story.

Kirloskar Industries was incorporated in 1978. The company’s shares traded at Rs 1,424.6 each.

The company currently has a market capitalization of Rs 1,390 crore. PE is at 23.9. This is well below the industry average of 63.1. On the other hand, the PB ratio is 0.7 which also follows the industry average of 2.3 for the remaining twelve months.

Back in 2017, Kirloskar Industries ’revenue skyrocketed and the growth trajectory was indeed impressive.

Since then, the company has been able to survive through pandemic ebb and flow and has consistently been on track for profit.

During fiscal 2021, the company’s EBIT margin increased from 14% to 22% YoY.

The promoter’s high stake of 72.6% indicates that the company will be managed in the interest of its shareholders. With the owners having an investment of almost Rs 1,200 crore in the company, they will be given incentives to build value in the long run for its stakeholders.

In 2022, the company is virtually debt -free and has a healthy liquidity position with a current ratio of 64.7. This makes Kirloskar Industries an undervalued small -cap stock that must be seen this year.

#5 Gloster

Kettlewell Bullen & Company was formerly renamed Gloster and comes with a 140 -year heritage in textile manufacturing. With a strong presence in the jute industry, it is the last company to feature our options for undervalued small -cap stocks in 2022.

Promoted by the Bangur family, Gloster is listed on BSE and currently has a market capitalization of Rs 590 crore. The shares traded at Rs 1,077.7 each.

PE hovers around 7 which is less than half of the industry average of 18.8. The PB ratio is at 0.6 while the industry average is around 6.6.

The company is a market leader in the production and export of various types of jute and its associated products.

In addition to jute manufacturing, Gloster has diversified its product portfolio into woven and nonwoven jute geotextiles and is heavily involved in the production of jute products for interior decoration and packaging of industrial and agricultural products.

To promote sustainable alternatives to plastics, Gloster signed a Memorandum of Understanding (MoU) with the Telangana government for an investment of Rs 330 crore in the jute sector in September 2021.

Needless to say, the promoter’s high stake of 72.6% instilled confidence in the company and its future growth prospects. Gloster has healthy cash flow management with a PAT of Rs 41.11 crore as at 31 March 2021. This is a YoY growth of almost 20%.

While there are risks arising from the regulated nature of the jute industry, Gloster offers a strong financial profile that makes it an attractive investment proposal to investors looking to expand their portfolios in this segment.

What to expect from small stocks in 2022?

Smallcaps has had a great performance over the past two years.

The real question now is – will the party continue in 2022?

Market experts argue that the trend will spread in 2022. That more or less makes your case for investing in undervalued small -cap stocks this year.

When the broader market becomes cheap, as happened in March 2020, one should be greedy and look at small capital that is undervalued and fundamentally strong. However, given the volatile nature of small -cap stocks, you must take into account high risks with high profit prospects. In other words, get ready for some wild swings.

Here again, there are ways to deal with volatility. Invest for the long term and that will help you overcome any short term market downturn.

Also, if you last longer, a smallcap has the potential to grow into a midcap or a large -cap stock if the business performance is exceptional.

Now all you have to do is look and invest wisely in some small-cap stocks that are completely undervalued and you may end up choosing the next Amazon by stealth.

Wouldn’t that change lives?

Happy Investing!

Disclaimer: This article is for informational purposes only. It is not a stock proposal and should not be treated as such.

This article is syndicated from Equitymaster.com

(This story has not been edited by AGRASMARTCITY staff and is automatically generated from a syndicated feed.)

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