Top 3 Penny Stocks to Watch Out for in India's Booming Energy Sector

The energy sector has always been a favorable option for those investors looking for big dividend payouts.

As the established energy companies are poised to keep growing earnings and pay bigger dividends, investors often look at them as potential candidates.

One more factor that contributes to the sector's enduring potential is the growing global demand for energy.

Economies have recovered and we could see the inevitable surge in energy consumption.

Moreover, the increasing adoption of electric vehicles, the expanding renewable energy market, and the development of cleaner technologies create a wealth of opportunities.

Additionally, governments worldwide are implementing policies focused on reducing carbon emissions and transitioning to sustainable energy sources.

So, it's safe to say that the transition from dirty energy towards cleaner energy sources is providing investors with a big opportunity.

While penny stocks would have been a great way to apply this opportunity, we only found three good names operating in the energy space.

Priced anywhere between Rs 1 to Rs 100, penny stocks are essentially the underdogs of the stock market world. These are a class of low-priced public companies that often fly under the radar.

But don't let their small price tags fool you. These pint-sized stocks can possibly double, triple or quadruple your money over the long term.

Here are the top 3 penny stocks operating in the energy sector.

#1 Confidence Petroleum

First on the list is Confidence Petroleum.

Trading at Rs 93 per share, the company has a marketcap of Rs 26.6 billion (bn).

Confidence Petroleum manufactures liquified petroleum gas (LPG) cylinders and supplies auto LPG in India with its network of bottling plants and auto LPG dispensing stations across India.

The company has actively made efforts towards India's renewable energy goals and its recent foray into the green hydrogen space proves that.

Confidence Petroleum announced its foray into the burgeoning market of green hydrogen with the manufacturing of type four cylinders. This cylinder is being manufactured by 'Silversky Exim Pvt Ltd', a subsidiary of its subsidiary company Confidence Futuristic Energetech.

The company, through the production of these cylinders, is set to revolutionize the hydrogen/nitrogen/CNG storage industry and harness the power of green hydrogen.

This foray signifies Confidence group's commitment to spearheading the global energy transition towards a cleaner and greener future.

By prioritizing innovation and environmental stewardship, the company aims to revolutionize the hydrogen storage industry and promote sustainable energy solutions.

Looking ahead, the company aims to become a fully integrated energy player in the country.

It aims to expand its auto LPG dispensing stations (from 248 in fiscal 2023 to 500 in fiscal 2025), CNG stations (from 32 in fiscal 2023 to 200 in fiscal 2025) and LPG sales volumes (from 14,000MT in fiscal 2023 to 25,000MT fiscal 2025) by fiscal 2025.

Between 2019-2023, the company's revenue and net profit have grown at a CAGR of 29.4% and 27.1%, respectively. The 5-Yr average RoE and RoCE stand at 13.8% and 17.5%, respectively.

In the next three years, Confidence Petroleum has set an ambitious target of achieving a revenue of Rs 100 bn.

For this year, the company could finish with revenues of around Rs 28 bn.

#2 Sanmit Infra

Next on this list is Sanmit Infra.

Trading at Rs 15 per share, the company has a marketcap of Rs 2.4 bn.

The company is a part of the Makhija Group. It is in the business of infrastructural development and also deals in petroleum products and bio medical waste disinfectant equipment.

The petroleum segment contributes around 95% to its revenue.

In the December 2023 quarter, the company posted a multifold surge in its net profit.

Note that Sanmit Infra has some growth levers in place as it undertook multiple expansion in the past two years.

Along with its bitumen expansion, the company has also diversified sales in the biomedical waste disinfection system across India and its planning to initiate an eco-friendly, less wood, or green cremation system (GMS) as a pilot project for various crematoriums in India.

During financial year 2023, the company also underwent a stock split.

The company's board recently approved setting up a bio CNG plant.

Apart from energy, the company is also actively involved in the realty space.

It mainly takes on projects in Mumbai and other cities in Maharashtra. The group has constructed residential & commercial complexes in the western suburbs at Bandra West and Khar Linking Road area in Mumbai.

As of March 2024, the company has minimal debt on its book.

Sanmit Infra's financial performance has improved in the past two years and the company is now banking on new areas to deliver profit growth in the next 2-3 years.

#3 Arabian Petroleum

Next on this list is Arabian Petroleum.

Shares of the company are only listed on the NSE.

Trading at Rs 86 per share, Arabian Petroleum has a market cap of Rs 933 million (m).

The company manufactures a wide range of Lubricants including Specialty Oils, Coolants, etc. used for application in automobiles and industrial machines and appliances.

Arabian Petroleum was listed on the exchanges last year at Rs 77.40 apiece on NSE SME platform.

Since the company was only recently listed, it does not have a long history of financials to display.

Going by the company's management guidance, the company is expected to finish FY24 on a strong footing.

Going forward as well, revenue is likely to increase further on account of a further increase in demand in the domestic market, along with an increase in exports.

In Conclusion

The Indian energy sector offers a promising landscape for investors looking for stocks with strong earnings growth potential. But despite the strong prospects, investors should exercise caution and closely monitor these stocks.

The performance of a company is greatly influenced by market conditions, industry trends, and economic factors, particularly during expansion phases.

Thus, it is essential to thoroughly assess the fundamental aspects of each company, ensuring investment decisions align with individual risk tolerance and investment objectives.

Before leaving, check out the below video where Richa Agarwal shares three top energy stocks and why they deserve to be on your watchlist.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...