Buy This SmallCap Stock With A Strong Balance Sheet & Good Dividends

Several high quality smallcap stocks have fallen sharply to 52-week lows or near about 52-week lows. The markets themselves have dropped by nearly 10% from all time record highs seen in the month of October. Here is a small cap stock to buy that can fetch good returns in the coming days.

Bajaj Consumer Care: Renowned brand names

This company manufactures and markets the renowned haircare brands like Bajaj Amla, Bajaj Almond Drops, Bajaj Brahmi Amla, Bajaj Zero Grey Hair Oil etc. In the skincare business the company has brands like Bajaj Nomarks Antimark Soap, Bajaj Nomarks Ayurvedics Antimarks Cream etc. In FY 2020-21 the company stepped up the presence and sales of its brands through the E-commerce Channel. It invested heavily in visibility; consumer offers and search marketing for our brands across leading e-commerce sites. As a result, Bajaj Consumer Care saw sales through e-commerce has gone up by a factor of 3 vs last year.

Bajaj Consumer Care: Good on dividend yields

Bajaj Consumer Care has a good track record of paying dividends. Last year the company declared a total dividend of Rs 10 per share, which on the current market price of Rs 198, translates into a dividend of more than 5%. The company also has good amount of liquid assets in cash and liquid instruments, which makes the balance sheet pretty strong.

The introduction of new products like the Bajaj Amla Aloe Vera is expected to give a boost to the financial performance of the company. Interestingly, the company is also a debt free company, with almost negligible debt on the books.

Bajaj Consumer Care: Buy the stock for good returns

The shares of the company have been pretty volatile and have fallen from levels of Rs 324 to levels of Rs 197. At these levels the downside risk on the stock is very low. In fact, should the markets fall sharply, FMCG stocks maybe a good place to hide.

For the quarter ending Sept 30, 2021, the company reported net Sales of Rs 215.15 crore, down 4.51% from Rs. 225.30 crore in September 2020. Bajaj Consumer EPS has decreased to Rs. 3.20 in September 2021 from Rs. 3.88 in September 2020, as margins of most companies in the sector came under pressure owing to high raw material costs.
We believe that the company can report an EPS of around Rs 15, in FY 2022-23 as margins stabilize and new product launches contribute to profitability. This means, even on a conservative basis, if you apply a p/e of 20 times, the stock should be back at that Rs 300 levels, which it was earlier.

A word of caution about the markets

Investors should exercise some caution on the markets, given that they have doubled from covid 19 lows seen almost 21 months ago. Invest only if you have an appetite for risk.

Disclaimer

Investing in stocks is risky, investors may do their own research before buying. Neither Greynium Information Technologies Pvt Ltd, nor the author would be responsible for losses incurred based on a decision in the article.