A steady growth in the topline as well as the operating profit helped some of the companies in the smallcap segment rebound sharply in the September quarter.
At least seven companies, with a market capitalization of over Rs 500 crore, reported a net profit in the second quarter after posting losses in the three preceding quarters, data analysed by ETMarkets showed.
These companies are JITF Infralogistics, Asian Energy Services, DB Realty, Quick Heal Technologies, Indo-National, Genus Paper & Boards, and HCL Infosystems.
Asian Energy Services
The engineering solutions provider for the energy sector reported a consolidated net profit of Rs 9.8 million in the September quarter, against losses in the preceding three quarters. Despite reporting losses in the preceding three quarters, the stock has given stellar returns to investors in the last 1 year by gaining 160%.
The strong rebound in the realty sector amid robust demand for premium residential space has put the sector on spotlight. This possibly helped DB Realty improve its performance and return to profits in the September quarter. In the second quarter, the realtor reported a consolidated net profit of Rs 896 crore, against losses of Rs 25-620 crore in the preceding three quarters. Thanks to the overall positive momentum in the realty sector, the stock has given 113% returns in the last one year.
This is the third smallcap company to see a turnaround in earnings. The company, which is engaged in solid waste management, logistics, and transportation, posted a profit of Rs 25 crore in the second quarter. In the preceding three quarters, the company trimmed its losses. From Rs 25 crore in the December quarter of last year, the company’s losses came down to Rs 6 crore in the June quarter. The company has also seen a steady rise in revenue in each of the last four quarters. Aided by the steady improvement in earnings, shares of the company have given stellar returns of 365% in the last 1 year.
Quick Heal Technologies
The information technology sector has been reeling under the slowdown in demand in key export markets such as the US and parts of Europe due to macroeconomic headwinds. But companies managed to see some easing of cost pressures in the September quarter which was also the case for Quick Heal. The company saw more than 100% sequential growth in EBITDA, which helped it report a profit of Rs 12.9 crore in the September quarter. The stock has also managed to outperform its largecap peers, giving 95% returns year-to-date.
What should investors do?
Given India’s strong macroeconomic conditions, most analysts see domestic-oriented sectors doing well in the near term, compared to commodity-facing and export oriented ones.
If one looks at the change in the consensus estimates post the Q2 results, automobiles and energy led the upgrades, while IT, chemicals and metals saw downgrades in earnings expectations.
As far as stock performance is concerned, then many experts stick to their bullish view on the midcap and smallcap sectors even after the stupendous rally seen in this segment.
“We expect some activity in terms of retail participation coming back and driving more domestic oriented stocks and largely I still think the midcaps and smallcaps continue to drive the rally upwards,” says Deepak Shenoy of Capital Mind.
(You can now subscribe to our ETMarkets WhatsApp channel)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)