These 10 smallcap stock picks can give up to 176% returns in 3 years

V Guard Industries: The brokerage has a 'long' rating for the stock with a target price of ₹389, indicating a potential upside of 60 percent in 3 years. V-Guard is in the business of stabilizers, UPS, wires & wiring accessories, pumps, water heaters, fans, and small appliances. The firm manufactures 60% of products in-house, up from 40% in FY16. With the ongoing focus on in-house manufacturing, the brokerage expects this proportion to improve further. Equirus believes that despite near-term demand concerns, the mid-to-long term outlook remains encouraging for the stock and the electrical space. It has a TP of ₹300, indicating a potential upside of 24 percent for the next 1 year.

Healthcare Global Ent: The brokerage has a long rating on the stock with a 3-year target price of ₹688 and a 1-year target price of ₹453. This implies a potential upside of 153 percent in 3 years and 69 percent in 1 year. HCG is a leading oncology hospital chain and is set to see strong growth with surging oncology cases and improving diagnosis in India, noted the brokerage. Its extensive network of 25 hospitals across India has facilitated the creation of a strong oncology franchise, it added. Aggressive network expansion over the last 6 years had affected HCG’s margins and leverage levels but its moderate capex plans offer visibility on margin improvement and robust FCF generation, stated Equirus. The company expects continued growth momentum across both mature and new hospitals and is confident of outstripping market growth (11%) with margin gains through its cost optimization initiatives and operating leverage benefits, it noted.

Kolte-Patil Developers: The brokerage has a long rating on the stock with a 3-year target price of ₹627 and a March 2024 target price of ₹496. This indicates a potential upside of 79 percent in 3 years and 41 percent by March 2024. KPDL is a Pune-based real estate player with a strong track record. The firm is targeting 25-30% pre-sales growth for FY23E and cumulative pre-sales of ₹8000-9000 crore by FY25E, noted the brokerage. The firm has comfortable net leverage of 0.24x as of Jun’22, which provides sufficient room for land acquisitions and re-development projects; this in turn is likely to propel its growth momentum, said Equirus. It maintains a positive stance on KPDL’s launch pipeline, improving the business development pipeline and comfortable net leverage.

Lumax Industries: The brokerage has a long rating on the stock with a 3-year target price of ₹3,676 and a 1-year target of ₹2,509. This implies a potential upside of 114 percent in 3 years and 47 percent in 1 year. Lumax enjoys a ~60% share in Maruti Suzuki’s headlamp sourcing, making it the largest player in India’s automotive lighting market. Till few years back lighting was more of a safety product which you need for night driving, but in most of the new launches it has become key design element of the vehicle due to LED lighting, which is going to drive the change, noted the brokerage. Automotive lighting is a structural growth segment due to transition towards LED lamps, it added. Management expects LED adoption to speed up, mainly driven by new model launches and a shift towards EVs, the brokerage further stated.

CEAT: The brokerage has a long rating on the stock with a 3-year target price of ₹3,654 and a 1-year target price of ₹1,768. This implies a potential upside of 161 percent in 3 years and 27 percent in 1 year. Over the last 10 years, the importance of R&D has increased in the tyre industry and CEAT has significantly stepped up its R&D spends, said Equirus, adding that the effects of this are visible in market share gains. With its focussed export market strategy and region-specific product launches, CEAT has seen a significant ramp-up in exports as well, it added. As the company is expected to grow ahead of the industry due to market share gains, operating leverage benefits should help narrow the margin gap with other large competitors over the next three years, noted the brokerage.

Prince Pipes & Fittings: The brokerage has a long rating on the stock with a 3-year target price of ₹1,004 and a 1-year target of ₹717. This implies a potential upside of 67 percent in 3 years and 17 percent in 1 year. The firm is India’s fifth largest plastic pipes & fittings manufacturer with a ~5%/8% market share in the total/organized industry, informed the brokerage. It is well-positioned to capture incremental market share in a consolidating industry and continues to be a strong challenger brand to sector leaders, stated Equirus. The company has gradually become a one-stop piping solutions provider with a vast product portfolio comprising pipes, fittings, and overhead tanks, it added.

Avanti Feeds: The brokerage has a long call on the stock with a 3-year target price of ₹980 and a 1-year target price of ₹720. This indicates a potential upside of 97 percent in 3 years and 45 percent in 1 year. Avanti is India’s leading shrimp feed manufacturer with a 48-50% market share. Its partnership with the Thai Union provides it a strong competitive edge, noted the brokerage. Feed manufacturers in India have been facing margin pressures since the last two years due to sharp increases in raw material prices but with recent price hikes taken by the industry and soymeal prices also easing, Equirus expects margins to revert to mean in the second half of FY23.

HG Infra Engineering: The brokerage has a long call on the stock with a 3-year target price of ₹1,125 and a March 2023 target of ₹895. This implies a potential upside of 80 percent in 3 years and 43 percent till March 2023. HG Infra Engineering’s order book at Q1FY23-end stood at ₹11,510 crore, offering strong revenue visibility for the next 2.5-3 years, said Equirus, adding that the management is targeting order inflows of ₹9,000-10,000 crore for FY23E, which will further boost visibility. Given the strong order book, execution capabilities and stable margin profile, Equirus expects the firm to deliver a revenue/PAT CAGR of 16.5%/12.8% over FY22-FY27E.

Mayur Uniquoters: The brokerage has a long rating on the stock with a 3-year and 1-year target prices of ₹970 and ₹710, respectively. This implies a potential upside of 94 percent in 3 years and 42 percent in 1 year. Mayur Uniquoters is a synthetic leather manufacturer, established in 1992. As per the brokerage, the firm has been witnessing a strong recovery in auto OEM/replacement and footwear segments. With the ongoing auto sector recovery, it expects volume growth of over 15 percent YoY in FY23E. With moderation in raw prices (PVC), margins are also expected to recover from Q2FY23, it added.

Jubilant Ingrevia: The brokerage has a long rating on the stock with 3-year and 1-year target prices of ₹1,380 and ₹1,040, respectively. This indicates a potential upside of 176 percent in 3 years and 108 percent in 1 year. Jubilant is a proxy play on the Indian chemicals industry as it is the lowest-cost producer of multiple pyridine intermediates that find application in the agrochemical and pharmaceutical industry. With a foray into diketenes, the company is likely to leverage its capabilities in both diketenes and pyridines and be a perfect import substitution play in this space, said Equirus. It added that the firm has announced a capex of ₹2,050 crore over FY22-FY25E across three verticals with 70% of the capex towards high-value business and Equirus expects the share of a high-value business to touch 72% by FY27E from 53% in FY22.