Best Bets For December: 5 Smallcap Stocks Trading From Rs 200-1,700 Are Attractive, 14-30% Surge Likely Ahead

Smallcap stocks have shown remarkable performance since last year. On a year-on-year basis, smallcaps have zoomed by a whopping 37%, outrunning benchmarks Sensex and Nifty. As per Axis Securities also revealed that since last month, a catch-up rally was also seen in the Smallcap Index, which has posted a robust 52% return since the Mar'23 low. For December 2023, the brokerage has picked 5 smallcap stocks trading between Rs 200 to Rs 1700 as a buy.

These five smallcaps have the potential to rise between 14% to 30%. Here's what Axis Securities said in its note:

1. JTL Industries: (TP: Rs 265, CMP: Rs 205.15, Upside: 29%)

With the phase-wise volume expansion in progress, the brokerage said, "We model Revenue/EBITDA/PAT CAGR of 46%/45%/51% over FY23/25E. We maintain our BUY rating on the stock and value JTL at 23x its FY25 EPS to arrive at our 1-year forward target price of Rs 265/share."

JTL reported good growth in sales volume in Q2FY24 at 81.7kt (up 57%/6% YoY/QoQ), and management expects to achieve sales volume of 3.3 Lc tonnes for the full year FY24 (37% growth YoY).

2. CIE Automotive India: (TP: Rs 585, CMP: Rs 484.10, Upside: 21%)

Axis Securities continues to like the company's growth story driven by (a) Operational Performance and Focus on building an EV product portfolio, (b) Healthy order book position and steady growth in Indian operations, (c) Strong FCF generations and negligible debt on the balance sheet, (d) Capacity building to meet demand from India OEM's. The growth trajectory in EU operations is expected to gradually recover in H2CY24 by the management.

Keeping these factors in view, the brokerage forecasts the company to post a Revenue/EBITDA/PAT CAGR of 9%/17%/19% over CY22-25E. It added, "We like CIEAUTO and reiterate our BUY rating on the company at a 1-year Forward PE multiple of 24x (unchanged) on Indian operations (aided by overall industry growth and demand-backed capacity expansions) and 10x (unchanged) on moderate European operational earnings for CY25 EPS (roll forward from Jun'25 EPS). Based on this, we arrive at our SOTP-based TP of Rs 585/share."

3. Westlife Foodworld: (TP: Rs 1,000, CMP: Rs 864.35, Upside: 16%)

The brokerage said, "We maintain our positive outlook on WLDL. Our confidence in the company's bright prospects is supported by its strong execution track record of Revenue/EBITDA growth of 17%/51% over FY16-20, which was driven by new product launches and cost rationalization programs (100-200bps cost reduction every year). We expect the company to deliver healthy Revenue/EBITDA growth of 28%/43% CAGR over FY22-25E (Post Ind. AS) led by above growth tailwinds."

4. CreditAccess Grameen: (TP: Rs 1,935, CMP: Rs 1,704.40, Upside: 14%)

Axis prefers CAGrameen amongst the microfinanciers, despite its premium valuations.

It added, "We believe the company remains well-poised to deliver superior performance over the medium to long term. This will be supported by (a) a Strong rural presence and strong rural focus, (b) a Customer-centric approach, (c) a Robust technology infrastructure, (d) a Strong Risk Management Framework and (e) Adequate capitalization. Post a strong show in H1FY24, the management has revised its guidance upwards on a few operational parameters. We expect CAGrameen to continue delivering strong RoA/RoE of 5.5+/23-25% over the medium term. We maintain our BUY recommendation with a revised target price of Rs 1,935/share and value CAGrameen at 3.3x Sep'25E BV."

5. PNC Infratech: (TP: Rs 415, CMP: Rs 339.60, Upside: 22%)

The Road sector is witnessing encouraging development owing to increased government thrust on infrastructure investment. Furthermore, diversification into Railways augurs well for the company implying lower dependence on road projects. The company reported good operating performance in Q2FY24 with Revenue/EBITDA/PAT growth of 8%/10%/7% which were broadly in line with estimates.

Considering the strong and diversified order book position, healthy bidding pipeline, new order inflows, emerging opportunities in the construction space, the company's efficient and timely execution and strong financial credence, Axis Securities note said, "we expect PNCIL to report Revenue/EBITDA/APAT CAGR of 12%/11%/12% respectively over FY23-FY25E.."

Also, the brokerage said, " Stock is currently trading at 12x and 11x FY24E/FY25E EPS which is attractive. We recommend a BUY rating on the company and value the stock at 11x FY25 EPS and HAM portfolio at 1x book value to arrive at a target price of Rs 415/share."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.