smallcap stocks to buy: 8 smallcaps where MFs hiked stakes in Q4. Worth investing?

NEW DELHI: Mutual funds bought dozens of smallcap and midcap stocks during the March quarter. Among them, at least eight stocks saw MF holding go up by over 100 basis points, March quarter shareholding data available so far suggests.

Analysts have been positive on many of these stocks of late. Among them, Mayur Uniquoters saw MF holding rise by 222 basis points to 3.6 per cent at the end of March quarter from 1.38 per cent at the end of December. The stock is up 34 per cent so far in 2021.

Sharekhan is expecting the company to report a 40 per cent YoY rise in March quarter profit.

“The company is expected to see robust revenue growth at 40 per cent YoY at Rs 183.30 crore, aided by a recovery in automotive and non-automotive businesses. On a QoQ basis, revenues are projected to improve by 8 per cent. Ebitda margins are likely to decline by 35 basis points YoY at 24.5 per cent,” the brokerage said. It has a price target of Rs 500 on the stock. It traded at Rs 399 apiece on Tuesday.

In Amrutanjan Health Care, MF stake rose by 206 basis points to 7.34 per cent from 5.28 per cent. This scrip has gained 14 per cent so far this calendar. It trades at a P/E of 24.7 times FY22 EPS.

Ashika Stock Broking has a ‘buy’ rating on the stock with a price target of Rs 670. The scrip quoted at Rs 614 apiece on Tuesday.

“Despite volatility in key materials (menthol and essential oils), gross margins of the company haven’t gone below 56 per cent in the last decade and with diversification in other businesses, this would provide much stability ahead. Moreover, the company is consistent with dividend playing with an average payout ratio of 25 per cent for the last five years,” Ashika said.

Indoco Remedies has delivered flat returns for 2021 so far, but MFs have raised their stake in the firm by 205 basis points to 18.74 per cent from 16.69 per cent sequentially. Anand Rathi expects Indoco to report a 308 per cent YoY rise in fourth quarter net profit at Rs 21.9 crore from Rs 5.4 crore in the year-ago quarter. Margins are seen expanding 429 basis points to 16.5 per cent while sales are projected to rise 19.5 per cent to Rs 325 crore.

In Capacite’s Infraprojects, MF holding stood at 11.45 per cent at the end of March quarter, up 189 basis points over 9.56 per cent at the end of December. Prabhudas Lilladher said Capacite’s revenues might have risen 27.6 per cent for the quarter, as the company witnessed a sharp pickup in operations, especially in CIDCO and other major private sector projects.

“We expect Ebitda margin to improve 100 bps YoY to 16.5 per cent due to operating leverage kicking in. Execution rampup in CIDCO project, commencement of MHADA, healthy OB from private sector and an overall upcycle in the real estate sector would drive strong performance in the coming quarters,” the brokerage said. It has suggested a price target of Rs 270 on the stock.

In the case of Ahluwalia Contracts (India), MF holding has gone up to 26.11 per cent from 24.48 per cent, up 163 basis points sequentially. Centrum Broking said execution picked up for the company led by strong order backlog and improved labour availability. That said, its margins for the quarter may remain under pressure due to lower efficiency and likely provisions towards certain legacy projects.

Safari Industries, Bharat Dynamics and Granules India are among other companies where domestic fund houses hiked stakes by over 100 basis points during the quarter gone by. Analysts are positive on Bharat Dynamics and Granules India.

JM Financial projects its price target for Bharat Dynamics at Rs 150 based on 16 times FY23 EPS.

“We derive comfort on a healthy order backlog of Rs 53,000 crore (4 times TTM sales), strong order pipeline and rampup non-defence revenues (smart city, medical equipment) and service income. Any changes to the cost plus margin structure on nominated orders may be a positive trigger,” JM Financial said.

In the case of Granules India, Q4 profit is seen growing 39 per cent mainly due to operating leverage and a lower tax rate.

Revenue for this firm is seen growing 27 per cent to Rs 760 crore, with Ebitda margin projected to expand 625 bps to 23 per cent.

Overall, out of 431 companies reporting March quarter shareholding patterns so far, 44 saw a rise in MF holdings, 62 saw a drop in fund exposure, while there was no change in shareholdings in the rest.