Six small-caps to buy after the current market fall

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Sneha Poddar, VP, Research, Broking & Distribution, Motilal Oswal Financial Services

1) Granules (TP 680): Granules indicated a 20% YoY growth in US sales for FY25. The company expects EBITDA margin to improve QoQ and anticipates FY25 EBITDA margin to be ~22-23%. In addition to the shift towards higher formulation sales from its legacy molecules, GRAN is implementing efforts to: 1) build a pipeline in the space of oncology, large volume products, and innovation/tech-based products (enzyme/contract manufacturing), and b) backwards integrate the manufacturing process of its legacy products. This augurs well for sustaining the earnings growth momentum beyond FY26 as well.

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2) Senco (TP 1350): Senco Gold (SENCO) is one of the most promising players in the organized retail jewellery market. The company has a pan-India presence with a strong network in the east region (store/revenue mix of 75%/ 80%). SENCO operated a total of 159 stores across India, with 93 company-owned stores and 66 franchise stores as of FY24. SENCO holds 4% market share in the eastern region, predominately in West Bengal, where 75% of its eastern region stores are located we continue to see store expansion-led growth for SENCO (estimated addition of 34 stores during FY24-26E, taking the total to 193 stores).

3) KNR Construction (TP 400): The current order book stands at Rs 65 billion, with roads (HAM) making up 50%, roads (Others) at 18%, and irrigation and pipeline projects at 32%. KNR has a portfolio of eight HAM projects in its current order book. Given a robust order pipeline and a strategic focus on expanding into new segments and markets, KNR aims to significantly enhance its order book. Additionally, considering the slow pace of awarding contracts by NHAI, the company is exploring partnerships for BOT projects and diversification into non-road segments. We expect an 11% CAGR in revenue over FY24-26. FY26 is anticipated to be a strong year as many projects would be under execution. EBITDA Margins are expected to be in the range of 17-18%.

Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers

1) Vishnu Prakash R Punglia (CMP: Rs 260, Target : Rs 300): VPRPL specializes in water supply contracts which includes constructing, designing, building, implementing, operating, maintaining and developing Water Supply Projects (“WSPs”). It also includes setting up Water Treatment Plants (“WTPs”) along with pumping stations and laying of pipelines for supply of water.

The company has an integrated business model with an in-house execution team and a fleet of more than 500+ construction equipment which helps in reducing its dependence on third parties for key materials and services required for project execution.

The current order book stands at ~Rs.4,717 crores spread across all the business segments to be executed over the next 24-36 months. We believe that the company will be a huge beneficiary of the infrastructure boom across India along with being a key player in water supply projects and getting diversified across other segments such as Roads and railways. Also, the company has a very strong order book in the pipeline along with the execution of projects across India. Considering all the above factors, we recommend a "BUY" rating for the company, setting a target price of Rs. 300 per share.

2) Bikaji Foods International (CMP: Rs740, Target: Rs 900): Bikaji is the third largest ethnic snacks company in India commanding a market share of ~9% with an international footprint, selling Indian snacks and sweets, and is the second fastest growing company in the Indian organised snacks market. Currently company has more than 300+ SKUs in their basket led by strong brand recall and reliable taste preference. It is also present in the frozen food segment.

Going ahead, with such operational efficiency and execution capabilities, the company intends to increase their direct distributor coverage from 2.5 lakhs to 4 lakhs by the end of FY26. We believe that the company’s operating efficiencies and higher penetration will lead to an increase in volume growth and operating margins, Therefore, we recommend a BUY rating on the stock with a target price of Rs900.

Read: Why small caps will continue to sizzle

3)  Talbros Automotive components (CMP: Rs 356, Target: Rs 450): Talbros Automotive Components has emerged as India’s leading gasket manufacturer, in collaboration with later JV partner Nippon Leakless The company’s gasket and heat shield division serves as a key supplier to major customers like Cummins, Bajaj Auto Limited, John Deere, Volvo-Eicher, Honda, and Hero MotoCorp.

Talbros is expected to tap the potential opportunities based on its strong product portfolio which includes supplying parts for plug-in hybrid electric vehicles to OEMs globally. The Company has secured an order of Rs1000 crores through the JV, from a leading European OEM. This order is mainly on the supply of Suspension Arms tailored for both conventional ICE vehicles and new-age EV platforms for EMEA and NAFTA regions.

We believe the stock to witness gradual re-rating on the back of operating efficiency and improved return ratios We initiate the coverage with a “BUY” rating on this stock with a target price of Rs450.

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