Best Small Cap Stocks To Buy In India

Markets have now hit the 34,500 levels, which is a new lifetime high. Picking the best small cap stocks is never easy in a rising market. However, we have picked some very good ones, which can generate good returns in the medium to long term. Take a look at some of the best small cap stocks that can be purchased in 2018.

   

Omkar Speciality: price Rs 72 - target price of Rs 130 Omkar Speciality Chemicals is engaged in the manufacture of organic, inorganic and organo inorganic intermediates. These find applications in several places like pharma (a major market for the company), chemical, glass, cosmetic ceramic and poultry feeds. The company supplies its products to several prestigious companies including Sun Pharma, Cipla etc. It also derives substantial part of its revenues from exports to countries in Europe, Australia, North America and Asian countries. Omkar Speciality has three manufacturing plants and also an R&D centre. OSCL is the largest manufacturer of Selenium Sulphide in India. Here below we tell you why this small cap stock can give you returns of at least 50 per cent in the coming one year or so.

Omkar Speciality: Demerger of business and uptick in domestic business The stock of Omkar recently dropped from Rs 206 to Rs 75, after the de-merger of the veterinary API business segment to Lasa Supergenerics. This makes the stock an extremely attractive buy after the drop. The Omkar Speciality management has guided for revenues growth of 15 per cent, with the launch of new products and better than expected performance in the export markets. The company is the only manufacturer of speciality iodine compounds. It is now getting into FMCG products where the working capital cycle is faster. The company expects the FMCG sector to contribute at least 40 per cent to revenues in the year's to come.

Omkar Speciality: Cheap on the valuations front Omkar Speciality is a stock that is cheap on the valuations front as well. The company is taking steps at debt reduction and working capital cycle. The launch of new products in the FMCG sector should also augur well for the company. The company can improve its performance and report an EPS of Rs 15 in 2018-19. This makes the stock cheap at the current levels of Rs 75. In fact, if you accord a 10 times p/e multiple to the stock, it should trade at Rs 150 at the very least. Buy the stock for good long term gains over the next 1-2 years. 

DB Corp :DB Corp owns the popular Dainik Bhaskar newspaper, which is the fourth largest circulated newspaper in the world. It also owns a Gujarati newspaper, a Marathi newspaper and also an FM radio station in 7 states and has 30 stations. In the second quarter of 2017-18, the company has taken several initiatives that are likely to propel growth. Among these include Content associations with the Harvard Business Review, TIME Magazine, New York Times, The Economist etc. The company is now laying focus on second phase of rest of Bihar launch. The company should reap the benefits of this expansion in the quarters to come.

DB Corp: Big expansion in radio, digital The company is also increasingly focussing on the digital space, where the next phase of growth of 200 million internet users would come from language users. News on the desktop and mobile would drive the company's growth story. Another major reason to be recommending the DB Corp stocks is the fact that election in states of Rajasthan and Madhya Pradesh in 2018 will drive advertisement and profitability in the next few years. The expansion of the radio business into Maharashtra, Chandigarh, Punjab ad Haryana is also likely to boost revenues for the company. DB Corp has also tied-up for being the exclusive music partner for many bollywood movies.

DB Corp: Fundamentally cheap The shares of DB Corp are not too expensive considering the various expansion initiatives and elections to key states in 2018 and national elections in 2019. The stock is trading at a p/e of around 14 times 2019 EPS. If you are looking at a good long term small cap stock to hold for the next 2-3 years, DB Corp should not be a bad bet. The promoter holding in the company is also very high at around 70 per cent.

Granules India: Granules India has a presence across the pharma spectrum from active pharmaceutical ingredients (API) to pharmaceutical formulation and finished dosages. The company's manufacturing facilities have approval from the US and European regulatory authorities. We are recommending this small cap stock to buy in India at the current market price for a number of reasons. Firstly, the company is laying a focus on finished dosages, which would add to margins and profitability in the coming years. The company has filed for a number of ANDAs with the US FDA and once these approvals come through, it can begin launching these products in the US.

Expansion to benefit Granules India Granules India plans a gradual expansion of its paracetamol facilities, Metformin and Guaifenes capacity. The Acquisition of Auctus will also lead to high growth in the API business. The company has already begun selling OTC products, which should further boost margins in the coming months. All these initiatives are likely to fructify in the next few years, which is when the profit after tax is expected to grow substantially in line with revenue growth at the company. To be precise all these would factor in FY 2019-20.

Good financial performance of Granules India Over the last few years, the financial performance of Granules India has been pretty decent. The company saw its profits rise from Rs 123 crores in FY 2016 to Rs 164.5 crores in the FY 2017. From a 2-year perspective the profitability should rise further due to the expansion plans at the company, apart from the new ANDA filings, whose launches good boost growth and profitability. We believe that the company could report an EPS of Rs 9 for FY 2018-19. This means the stock is trading at a p/e of just 14 times. The stock should rise and give returns of at least 30 per cent in the next two years. A great small cap stock to own.

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