2 Smallcap Stocks to Hold
The #Nifty Small Cap 250 index marginally declined in the week ended July 23, closing at 9026.25 over its previous week. However, it gained 8.3% in a month and was up a whopping 110% in a year. Small-cap stocks are risky but can do wonders if selected and tracked carefully. After quickly scanning the small-cap universe, we came up with two shares with a solid potential to multiply investors' wealth.
Pix Transmissions Ltd (BO:PIXT)
Established in 1982, Pix Transmissions Ltd is one of the fastest-growing companies in India's power and fluid transmission sector. The company manufactures high-quality industrial and automotive belts, lawn and garden belts, agricultural belts, hoses, hose assemblies, and end fitting to cater to various power drive requirements. The end-users of Pix Transmission's products are machines used for automotive, food processing, cold storage, domestic appliances, packaging, steel, and textile and cement industry. Pix Transmission has a robust overseas infrastructure to market and sells its products. With a distribution network in 45 nations, the company exports to more than 70 countries worldwide. Plus, it has 250 channel partners in more than 100 countries across the globe. It has a clear competitive advantage in terms of niche and market penetration.
In FY2021, Pix Transmission reported consolidated revenue of Rs 400 crore, up 31.6% year-on-year. Domestic revenue contributed 52% while the remaining 48% came from exports. Its operating profit skyrocketed a whopping 82% to Rs 111 crore during the same period. Net profit more than doubled to Rs 65 crore in FY2021 over its previous fiscal. The company's 10-year revenue CAGR was 8.9%, and operating profit CAGR was 11.9%. Net profit CAGR during the same period remained a robust 52%. Promoters and institutional investors have marginally increased their holding in the company at the quarter ending June 2021. Pix Transmission has plans for capacity expansion with an infusion of Rs 60 crore in capital expenditure. Over the last few quarters, it has reduced its debt, thus, consolidating its financials. Although the share has delivered a humongous 614% returns in a year, 323% in six months, and 68% in a month, it is poised to move upwards further.
Caplin Point Laboratories Ltd (NS:CAPL)
Caplin Point Laboratories manufactures and develops a broad range of generic formulations and branded drugs. With a vintage of over 30 years, the company derives its more than 90% revenue from exporting to emerging markets, including Latin American and African countries. Caplin has a successful end-to-end business model for its sole distributors through last-mile delivery solutions. Over 117 times subscription for the company's IPO in 1994 is a record in the Indian pharmaceutical industry.
#CAPLIPOINT is one of the fastest-growing small-size pharma companies through tie-ups with multinational companies in India for their contract manufacturing requirements. It has also forayed into the biotech market with a capability of producing multiple biotech products. Apart from this, Caplin has also ventured into the regulated markets backed by its manufacturing facilities approved by ANVISA (Brazil) and GMP (European Union).
Now let us take a look at the company's financials. In FY2021, its consolidated total revenue touched Rs 1061 crore, up 23% year-on-year. Operating profit and net profit grew 26% and 12.6% year-on-year, respectively, during the same period. Its 10-year CAGR for revenue, operating profit, and net profit was a robust 29.3%, 43.3%, and 44.7%, respectively. Caplin's unique business model, a strong presence in semi-regulated markets of Central America, foray into the high-risk-high-reward USA injectable market and South American market coupled with opportunities offered by the pandemic should be likely to propel its top-line growth ahead. On the balance sheet front, it has reduced debt considerably in the last few quarters and marching towards a debt-free company. The stock has doubled in a year and returned 68.5% and 20.5% in six months and one month respectively.
HAPPY TRADING