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  • Oct 4, 2022 - 6 Penny Stocks that Could Be Hidden Bluechips. Take a Look...

6 Penny Stocks that Could Be Hidden Bluechips. Take a Look...

Oct 4, 2022

Editor's note: The Indian stock market gave investors a mighty scare in the past two weeks.

Benchmark BSE Sensex fell from 60,500 levels in mid-September to as low as 56,000 level in the next two weeks.

However, little did the investors know that by the time they would finish their breakfast this morning, the Sensex would be staring at a 1,200-point rally. Gains made in the previous three sessions have calmed some nerves.

As the roller coaster ride of Indian market continues, you need to stay cautious because the kind of macro environment we've witnessed recently suggests the volatility may prevail in the near term.

More so in the segment of penny stocks.

Though the penny stocks space is to be always tread very carefully, you could make good money from the space if you pick the fundamentally strong penny stocks.

They could even deliver quick gains in no time and be your multibagger penny stocks for 2023.

In April this year, we wrote to you about 6 penny stocks which could be hidden bluechips.

Penny Stocks that Could be Hidden Bluechips

Company Name CMP (Rs) YTD Performance (%)
Rubfila International 91.1 -14%
Mold Tek Technologies 89.5 5%
Skipper 73.5 -5%
Mangalam Seeds 89.6 1%
WardWizard Innovations 53.2 -36%
Gokul Agro 85.9 27%
Source: Equitymaster

The above list is still relevant today. Continue reading to know more about these penny stocks.

Penny Stocks that Could Be Hidden Bluechips

Did you know some of the big bluechips that you know today were penny stocks at one point in time?

Be it Eicher Motors or Lupin, these penny stocks made their investors rich in the long term.

However, not all penny stocks have the same fate. In the short term, these stocks come with a considerable amount of risk. You should be cautious with them.

Though penny stocks could be very volatile, they can be good investments, provided they are fundamentally strong and have good growth prospects.

Here are 6 penny stocks that could become future bluechips.

#1 Rubfila International

First on our list is Rubfila International, one of India's largest manufacturers of heat resistant rubber threads.

It is the only Indian company to manufacture both talcum and silicon-coated rubber threads.

The company's products are used in niche areas such as toys, meat packing, medical webbing, and bungee jumping cords. It has also expanded its business to the hygiene segment after acquiring Premier Tissues.

Rubfila currently has a manufacturing capacity of 20 thousand metric tonnes (MT) and is actively expanding its capacity to meet the growing demand for rubber threads.

It has a strong domestic presence and exports its products to over 30 countries globally.

In the last three years, the company's revenue has grown at a compound annual growth rate (CAGR) of 14.3%, led by high demand for rubber threads. The company's net profit has also grown at a healthy rate of 25.2% during the same period.

Rubfila has been consistently paying dividends in the last three years and has a three-year average dividend payout and a dividend yield of 28.2% and 2.7%, respectively.

The company is also debt-free, leaving a higher scope for the company to take leverage in case of any expansion plans.

The revenue of the company grew by 45.2% year-on-year (YoY) in the recent quarterly results, and the net margin stood at 8.1%.

Going forward, the company is expected to grow its revenue by expanding its capacity.

To know more about Rubfila, check out its factsheet.

Update: In the June 2022 quarter, the revenue grew by 34.5% YoY. The net profit slightly declined by 3.3% YoY due to higher expenses.

Recently the company has started production at its new production line with a capacity of 2,500 tons. It is also planning to set up new production lines to meet the demand of the export markets.

#2 Mold-Tek Technologies

Next on our list is Mold-Tek Technologies, the only listed engineering services company in India.

It specialises in providing civil and mechanical engineering services through an experienced team of professionals with knowledge spanning multiple verticals, including engineering, project management, and analytics.

The company also offers design engineering, detailing, and drafting services to its clients.

Mold-Tek Technologies' clients include steel fabricators, design-build firms, general contractors, architects, and engineers.

It also has a global presence through sales offices in the USA and Europe, apart from the domestic presence.

In the last three years, the company's revenue and profit slightly declined due to the pandemic. However, it managed to have a positive net margin that stood at 12.1% at the end of 2021.

The company has been consistent in paying dividends. Its three-year average dividend payout ratio and dividend yield stand at 37% and 3.1%, respectively.

It is also a debt-free company, with positive free cash flows over Rs 190 m in the financial year 2021.

In the recent quarterly results, Mold-Tek Technologies' revenue grew by 28% YoY due to the economic recovery. Its profit also jumped by 70% YoY due to higher sales. The net profit margin expanded by 1.5%.

To know more about Mold-Tek Technologies, check out its factsheet.

#3 Skipper

Next on our list is Skipper, a leading engineering products manufacturing company.

It is known for manufacturing transmission and distribution structures like towers and poles.

The company also manufactures polymers such as pipes and fittings and is trusted to execute infrastructure EPC projects.

It has five manufacturing facilities with 0.3 m MT for engineering products and 51 thousand MT for polymer products.

The company has an extensive distribution network of 20,000 retailers for its polymer segment.

Skipper is a trusted partner in India with clients diversified across the country. It also has an international presence spanning 40 countries worldwide. Some of its clients include Tata Projects, Reliance Jio, and Power Grid.

In the last three years, the company's revenue and net profit declined mainly due to Covid-19. However, it managed to have a positive net margin.

Its debt to equity ratio stands at 0.4x and also has a positive free cash flow of Rs 669m.

The company has also been paying dividends consistently and its three-year average dividend payout and yield stand at 5.2% and 0.2%.

In the recent quarterly results, its revenue and net profit fell slightly from last year. However, the performance has improved from the previous quarter.

Going forward, a strong order book will drive the revenue in the medium.

To know more about Skipper, check out its factsheet.

#4 Mangalam Seeds

Fourth on our list of penny stocks is Mangalam Seeds, a seed manufacturing company.

It is engaged in the business of production, processing and distribution of field and vegetable crop seeds.

Some of the major crop seeds it produces are maise, pearl millet, bajra, cumin, jowar, and yoyo grass.

The company has a seed production and processing unit in Gujarat along with a storage unit with a capacity of 4,000 MT.

It also has a strong presence in Gujarat and Rajasthan, with a network of 421 distributors and 1,150 dealers.

Mangalam Seeds invests heavily in research and development (R&D) and has two R&D facilities dedicated to plant breeding and seed technology research.

In the last three years, the company's revenue has grown at a CAGR of 8.6%, led by sales volume growth. The net profit also grew at a healthy rate of 21.5% (CAGR).

The company's debt-to-equity ratio stands at 0.1. It is also cash flow positive and has a free cash flow of 19 m. Mangalam Seeds' revenue grew by 11.7% in the recent quarterly results, and the profit grew by 5.9%.

Going forward, the company plans to capture the rising demand for hybrid seeds in the country.

To know more about Mangalam Seeds, check out its factsheet.

#5 WardWizard Innovations & Mobility

Fifth on our list is a pioneer in electric vehicle (EV) manufacturing, WardWizard Innovations & Mobility.

The company is engaged in the business of manufacturing electric bicycles and low-speed and high-speed e-vehicles.

It also manufactures consumer appliances such as LED TVs, hydrogen water bottles, refrigerators, and air and water purifiers.

WardWizard has a manufacturing unit in Gujarat with a capacity to produce 100 thousand units in one shift.

Currently, it is transitioning to increase the capacity to produce 400-600 thousand units in the 2-3 shifts.

The company has seven own retail outlets and more than 450 dealer touchpoints across the country to sell its e-bikes and e-bicycles.

In the last three years, the revenue has grown by 632% (CAGR) due to an increase in sales volume. The net profit has grown tenfold with a net margin of 4.8%.

The company is also debt-free.

In the recent quarterly results, the company's revenue grew by 443% YoY in the driven by volumes. Net profit has also jumped by 314% YoY.

Going forward, the company is planning to capitalise on the growing demand for EVs by launching new products and also releasing new models of existing vehicles.

To know more about the company, check out its factsheet.

Update: In financial year 2021-22, the company clocked the best sales and its highest-ever in a year. Sales grew over eight-fold at 30,761 units in the said year compared to 3,834 units of electric two-wheelers sold in 2020-21. The company has continued the momentum this year too and registered a growth of 127% in June 2022 sales.

At present, the company is lining up close to Rs 6.5 bn investment for the manufacturing of Li-ion advance cells and related infrastructure.

If it keeps up the pace, WardWizard could become one of India's top EV penny stocks.

#6 Gokul Agro Resources

The last company on the list is Gokul Agro-Resources, an edible oil manufacturing company.

It primarily engages in refining and manufacturing edible oils, non-edible oils, and meals. Some of its products include soya bean oil, vanaspati, sunflower oil, palm oil, groundnut oil, and cottonseed oil.

The company has a seed processing capacity of 3,200 tons per day (TPD), refining capacity of 3,400 TPD, and vanaspati capacity of 200 TPD at its manufacturing plant in Gujarat.

Gokul Agro has a distribution network spanning 20 states in India to cater to its customers in these states.

It also exports its products to China, the USA, South Korea, and European Union.

The company's revenue has grown at a CAGR of 22.6% in the last three years, led by growth in volumes. Net profit has also grown by 60% during the same period.

In the recent quarterly results, the revenue grew at 15.3% YoY, and profit grew by a healthy rate of 138.5% YoY, led by the recovery of economic activity.

To know more about the company, check out its factsheet.

Should you invest in these penny stocks with hidden potential?

Penny stocks look like attractive investments given their low prices. Moreover, they become lucrative options when the prices of these stocks keep increasing over a period of time.

However, you must understand that penny stocks are the most volatile investments. With high returns comes higher risk.

Hence it is important to choose companies that have healthy financials, follow good corporate governance practices and have viable prospects.

Choosing the right penny stock for your portfolio isn't a Chinese puzzle. Proper due diligence will help you crack the code.

In July this year, Co-head of Research at Equitymaster Rahul Shah recorded a video and shared his top penny stocks in the market.

Do check it out if you haven't already.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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