These companies not only demonstrated financial resilience but have also rewarded investors with impressive market gains with some of them turning multibaggers.
ETMarkets analysed the earnings performance of stocks in the BSE smallcap index and found that 47 companies have shown a sustained trajectory of increasing EPS. Among these, 23 stocks have not only maintained robust financial health, but have also delivered multibagger returns.
The coveted stocks ranged from varied sectors including capital goods, textiles, engineering and construction, renewable energy among others.
Interestingly, capital goods emerged as a stronghold within this group of outperformers, with 5 of the 23 multibagger stocks hailing from this segment.
Shakti Pumps, which has improved its EPS from a meagre 0.54 in June quarter last year to a massive 46.24 in June quarter this year, is leading the charts with a gain of 520% in the last one year period.
GE T&D is a distant second in the list, where it improved its EPS from 1.1 (June 2023 quarter) to 2.59 (June 2024 quarter), with a return of 376% during this period.
Both these companies hail from the capital goods segment, which also has others included from the sector like Inox Wind and Balu Forge Industries.
There are two small cap companies from the finance world — Motilal Oswal and Cholamandalam Finance — that have improved their earnings performance consistently for the last four quarters and at the same time gained over 100%.
What next?
Based on the recent first quarter, analysts say smallcaps are poised for robust earnings growth, with a CAGR potentially exceeding 20% over FY24-26, outpacing the Nifty50.
During Q1, smallcaps from telecommunications, realty, trading, healthcare and plastic product manufacturers have reported three-digit revenue as well as PAT growth on a quarter-on-quarter basis, according to Alphaniti Investment Advisors.
Meanwhile, companies in electricals, finance, consumer durables, hospitality, infrastructure, textile and retail space posted double-digit growth. Sequentially, realty and plastic product manufacturers, on the other hand, reported three-digit revenue and PAT growth during the June quarter.
However, current valuations reveal that smallcaps (PE: 29.6, PB: 4.4) are relatively expensive, where the market cap ratio has exceeded levels seen during the 2008 crisis.
Sectorally, capital goods companies witnessed moderation in order inflows in the June quarter, even as execution was decent, while profitability surged.
Nuvama said the demand scenario continues to remain strong given India Inc.’s capex super-cycle at play driven by 35+ industries mainly by Power T&D, railways, defence, electronics, data centres, RE generation, water & wastewater treatment.
“Product players across the value chain (switchgears, transformers, gensets, turbines, etc.) continue to enjoy multi-year high operating margin levels driven by better product mix, operational efficiencies, higher capacity utilisation rate and pricing power,” the brokerage noted.
With inputs from Ritesh Presswala
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)