2 Small Cap Stocks To Buy For Gains Up To 17% In 3 Months: HDFC Securities

In the holiday truncated week, Indian benchmark indices gained massively on positive global cues as the markets had already factored in a rate hike by the US Federal Reserve Bank. Nifty clinched levels of 17287.

Meanwhile, HDFC Securities has come up with positional calls based of technical analysis of the stock by the brokerage's research experts. The given stock ideas are based on the market movements by examining historical data, like price and volume. The analysis of data and charts is carried out for trading signals and price patterns to identify investment opportunities.

So, here are the 2 stocks from different industries given as a 'Buy' for gains up to 17% in just 3 months of time.

Zensar Technologies 

The small cap company is a technology consulting and services company with 10,000 associates in 33 global locations. The company's focus is on conceptualizing, designing, engineering, marketing and managing digital products and experiences for high-growth companies. The company renders its services to industries such as Hi-tech, Manufacturing, Banking & Financial Services, Insurance, Consumer Services, Public Services and Healthcare. HDFC Securities in its research report suggest to 'Buy' the stock of Zensar for a target of Rs. 440, which at the current price of Rs. 376.9 will mean gains of 16.74%. The time horizon for the investment is suggested to be 3 months with a stop loss maintained at Rs. 334.

Technical observation as per the brokerage 

Brokerage is of the view that after consolidating in the last 5 sessions, the stock has given a breakout. The stock has crossed above its 21 EMA which suggests of bullishness in the counter. "Major momentum oscillators are showing positive indications. RSI oscillator is placed above 50 and rising upwards, Indicating strength in the current uptrend", notes the brokerage. So in view of these observations, the brokerage recommends to buy Zensar at the current price and average at Rs. 350 for the upside target of Rs. 400 and Rs. 440. 

Angel One 

This is another small cap company previously known as Angel Broking. The company is amongst the leading independent full-service retail broking house.

Technical observation as per the brokerage 

The stock has corrected from its high scaled in October 2021 of Rs. 1689. Then in December, the stock found support at Rs. 990 and since then has strongly rebounded. During this week, the stock broke out of 1180-1380 range on the back of healthy volumes, indicating the stock is set to continue its intermediate uptrend. Further, weekly momentum readings like the 14-week RSI are picking up, which is encouraging. The Relative Strength Comparative indicator too is climbing higher, indicating the stock is likely to outperform the Nifty index. 

Stock                               Buying range              Current market price      Target         SL 

Zensar Technologies    Rs. 350 for averaging          Rs. 376.95                    400/440       334 

Angel One                       1440-1472.3                      Rs 1472.3                    1615/1760    1330 

Both the above investment ideas are for the time horizon of up to 3 months.

Disclaimer: The above stocks are taken from the brokerage report of HDFC Securities based on technical analysis. Please engage in your own analysis before taking on any such risky bet.

Read More

Three Smallcap Stocks to Include in Your Portfolio

 In the smallcap universe, we have picked up three scrips that hold promise for the future.

Rossari Biotech Ltd

Rossari Biotech is a specialty chemical and textile chemical manufacturing company. It is the largest textile specialty chemical manufacturer of India. They operate in three main segments: Home and personal care, Textile chemicals, Animal Health, and Nutrition products. They have over 2,000 plus products under these three categories. The key strength of the company is that they have a very diversified product portfolio. With a good research facility and pan India distribution network, they can increase their customer base. The current situation of the pandemic has made people realize the importance of hygiene. Thus the demand for disinfectants, antibacterial and antimicrobial textile material has increased significantly. The need for these products will expedite its revenue growth.

From the last five years, the company has reported a steady rise in revenue and net profits. Its net profit was Rs 79.10 crore in FY2021, up 403% compared to Rs 15.72 crore in FY2017. In FY2021, Rossari reported a consolidated total income of Rs 700.62 crore, up 16% from Rs 603.7 crore in FY2020. Its profit after tax was up 20.7% year-on-year during the same period. The stock gained 69.8% in a year, 40.3% in six months, and 1.8% in a month. Currently, it is trading at an 8.4% discount to its 52-week high.

Route Mobile Ltd 

Route Mobile is India's one of the leading cloud computing services providers. They offer services to enterprises, OTT players, and mobile operators. The company also offers text messaging, voice calling, firewall, email services to their clients worldwide. The recent acquisition of the email communication platform of Sarv Webs will help the company provide a complete customized email interaction platform to its clients. The growing use of OTT platform, OTP services by various sectors should boost its revenue in the future. The three years revenue CAGR growth was 40.8% and 39.9% for net profit. Revenue was Rs 1,422.2 crore in FY2021, up 46.9% compared to Rs 968.1 crore in FY2020. Its net profit of Rs 133.3 crore more than doubled during the same period. The scrip returned 225.1% in a year, 66.8% in six months, and a staggering 24.8% in a month, indicating continued momentum in the stock.

Mazagon Dock Shipbuilders Ltd

Mazagon Dock is a government company operating under the Ministry of Defense. The company is known as 'hip builders of the nation'. The company's shipbuilding division offers building and repairs of naval ships, whereas the submarine and heavy engineering divisions include building, repairing, and refitting diesel-electric submarines. Overall the outlook for the defense sector is positive. The government has recently banned importing 101 defense items reflecting the Government'sGovernment's focus on promoting and creating opportunities for Indian companies. It should drive the top-line of Mazagaon shipbuilders in the near to medium term.

The company's net profit in Q4FY2021 was Rs 230.54 crore, up a whopping 455% compared to Rs 41.55 crore in the corresponding period of fiscal 2020. The scrip jumped 51.8% in a year, 27.9% in six months, and 3.6% in a month, indicating a continued momentum.

Read More

Two Stocks in Midcap and Smallcap for Investment

We expect that companies with a robust global network and sales in diverse geography will likely benefit the most. A few mid-cap and small-cap companies are poised to do well in this space near to medium term.

Rajratan Global Wire Ltd

Established in 1988, Rajratan Global Wire manufactures high carbon steel wire in India. It specializes in the manufacturing of automotive tyre bead wire, high-quality spring and rope wires. The company is one of the largest bead wire manufacturers in Asia. The company has two manufacturing facilities at Pithampur in Madhya Pradesh and Ratchaburi in Thailand. The Company exports products to customers in India (from Thailand), Italy, the USA, The Czech Republic, South Korea, Malaysia, Indonesia, Philippines, Vietnam, Sri Lanka, Finland, and Bangladesh. The Indian tyre industry is projected to grow 13-15% by value and 7-9% by tonnage in FY2022, driving the growth in the OEM and replacement segments. The Government of India's focus on infrastructural development is expected to shoot up automobile offtake and, in turn, tyres.

Rajratan Global Wire is mulling to up a new manufacturing facility of tyre bead wire with a capacity of 60,000 tonnes per annum with a proposed capital expenditure of Rs 300 crore. It is currently operating at 80%- 90% at both India and Thailand locations. The company posted stellar results in the quarter ended June 2021. Its revenue grew 182% to Rs 182.3 crore in Q1FY2022 from Rs 64.6 crore in Q1FY2021. Its net profit skyrocketed a mind-blowing 1228.5% to Rs 21.9 crore from Rs 1.6 crore in Q1FY2021. Rajratan has achieved a leadership position in India's tyre bead wire business with a global scale of operations in a short period. Promoters have steadily increased their holding to 65% at the end of June 2021. In a year, the scrip more than six folded increased investors' wealth. It is up 263.7% in six months and 41% in a month. The stock was in upper circuit closing at Rs 1867.2 on Friday, July 23.

Sundram Fasteners Ltd

Sundram Fasteners is a 55-year old company belonging to the TVS Group. The company manufactures fasteners, power train components, sintered metal products, iron powder, cold extruded parts, radiator caps, water pumps, oil pumps, and wind energy components. Sundram's high precision and critical components are used in the automotive, infrastructure, windmill, and aviation sectors. Sundram's revenue comes from 52% domestic OEMs, 13% aftermarkets, and 35% exports. The government's infrastructure development drive and focus on urban transportation, a better outlook for the automotive sector driven by scrappage policy, sequential recovery in the US markets should push the company's top-line growth. Sundram's diverse product and customer portfolio reduces the associated operational risks. The company intends to grow the share of exports in its overall revenue to 50% through new, value-added products launches. It has recently introduced transmission products apart from working on hybrid electric vehicle products to increase revenue to minimize dependence on traditional fasteners business.

In FY2021, although its revenue declined roughly 2% year-over-year, its EBITDA increased 5.5%. On a 9-year CAGR basis, revenue growth was 4%, and operating profit growth remained 6.8%. Net profit CAGR during the same time was 12.7%. In Q4FY2021, revenue rose 14.4% year-on-year, and net income grew 4.7%. The stock increased investors' wealth by 90.9% in a year, 38% in six months. The scrip is roughly trading at a 12% discount to its 52-week high of Rs 867.7.

DISCLAIMER

Investing in stocks is risky and investors need to be cautious. Neither Brokerage nor the author would be responsible for any losses incurred based on decisions made from the article. Please consult a professional advisor and avoid investing lumpsum amounts.

Read More