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  • May 4, 2023 - Undervalued Gems: 5 Smallcap Stocks Hitting 52-Week Lows. Time to Take a Look?

Undervalued Gems: 5 Smallcap Stocks Hitting 52-Week Lows. Time to Take a Look?

May 4, 2023

Undervalued Gems: 5 Smallcap Stocks Hitting 52-Week Lows. Time to Take a Look?

Last week, Indian benchmark indices witnessed gains on all five sessions, with the NSE Nifty gaining 407 points or 2.3% and the BSE Sensex rising by over 1,400 points or 2.4%.

However, the BSE Small-cap index shot up little over 6% in last one month, outperforming key benchmark indices in April 2023.

The bullish trend in benchmark indices have left Dalal Street bulls optimistic about the continuation of this rally, especially after the breakout given by the smallcap index.

As the indices continue their upward trajectory, more stocks are expected to see an improvement.

However, that many smallcap stocks trade at their 52-week lows, irrespective of the macro trends.

Here are five...

#1 Aavas Financiers

Leading the list is Aavas Financiers.

Aavas Financiers is a housing finance company in India. The company provides housing loans to customers belonging to the low and middle-income and self-employed segments in suburban and rural India.

The company's product portfolio includes home loans, land purchase and construction, home improvement loans, and others.

Shares of the company hit their 52-week low last week on 28 April 2023 as managing director and CEO Sushil Agarwal reduced his holding by 1.75%.

Agarwal has reduced his shareholding in the company to 1.55% against 3.3% in the December 2022 quarter.

However, this is not the first time that stock has failed to generate profitable returns. In the past one year, Aavas Financiers' shares have eroded over 39%.


This trend can be attributed to consistent stake reduction by the company's promoters since September 2021.

Look at the table below.

Quarter ending 21-Jun 21-Sep 21-Dec 22-Mar 22-Jun 22-Sep 22-Dec 23-Mar
Stake (%) 50.07 39.22 39.21 39.2 39.19 39.16 39.15 3.14

For the December 2022 quarter, the company reported a 20.2% YoY rise in revenue to Rs 4.1 billion (bn). Net profit for the quarter increased by 20.7% YoY to Rs 1.1 bn due to an increase in interest income.

Going forward, the company plans to enhance the technological upgradation systems for line of sight (LOS), learning Management systems (LMS), and enterprise resource planning (ERP). It also plans to deepen its presence in existing states and enter new states.

For more details, see the Aavas Financiers company fact sheet and quarterly results.

#2 TeamLease Services

Second, on the list is TeamLease Services.

TeamLease Services is one of India's leading people supply chain companies.

The company offers temporary staffing, permanent recruitment, payroll process outsourcing, regulatory compliances, assessment, and corporate training services.

Shares of the company hit their 52-week low last week on 28 April 2023.

This downfall in the stock can be attributed to the company's upcoming results. The company expects its margins to be under pressure for the coming quarters owing to the hiring slowdown in the IT industry and the withdrawal of the National Employability Enhancement Mission (NEEM) program.

However, the stock has been on a falling spree for a year. Over a year, the shares have eroded by 44%.


This can be attributed to the continuous reduction in FII stake in the company since March 2022 quarter. FII's stake now stands at 36.5% against 37.2% in December 2022 quarter.

Look at the table below.

Quarter ending 21-Dec 22-Mar 22-Jun 22-Sep 22-Dec 23-Mar
Stake (%) 38.2 37.4 37.3 37.1 37.3 36.5

For the December 2022 quarter, the company reported a 14% YoY rise in total revenue at Rs 20.2 bn. However, the net profit of the firm dropped 5% YoY to Rs 290 m due to muted revenue growth on account of weaker festive demand in the December quarter.

Going forward, the company plans to increase its focus on AI, healthcare, and the manufacturing sector for staffing and recruiting services.

For more details, see the Teamlease Services company fact sheet and quarterly results.

#3 Computer Age Management Services (CAMS)

Third on the list is Computer Age Management Services (CAMS).

CAMS is a technology-driven financial infrastructure company and services provider to mutual funds and other financial institutions for over two decades.

It's India's largest registrar and transfer agent of mutual funds with an aggregate market share of approximately 70% based on mutual fund average assets under management (AAUM) managed by its clients and serviced by them.

Shares of the company hit their 52-week low on 29 March 2023 amid market volatility and continuous muted quarterly result.

In the past one year, the shares have delivered a negative return of 15.9%.


This fall was due to poor quarterly results and sell-off by promoters. A general loss of interest in share markets due to volatility also hampered CAMS' business.

For the December 2022 quarter, the company reported a 2.5% YoY rise in revenue to Rs 2.4 bn. Net profit for the quarter came in at Rs 737.2 m, down 4.6% YoY due to an 8% YoY rise in the total expense of the firm.

For the coming quarters, it's moving towards being a technology product company for mutual fund services rather than a tech-enabled service provider.

For more details, see the CAMS company fact sheet and quarterly results.

#4 Blue Dart Express

Fourth on the list is Blue Dart Express.

Blue Dart is a dominant player in the domestic express service industry. It has a strong brand reputation and an early-mover advantage.

Support from its parent group gives the company access to the largest express and logistics network.

Shares of the company hit their 52-week low on 20 March 2023, with a sharp fall in the majority of logistics stocks in India due to supply chain disruptions and a decline in delivery orders due to rising inflation.

Over the year, Blue Dart Express has delivered a negative return of 14.8%.


This downfall was due to global slowdowns and capacity overhangs resulting in pricing corrections.

In addition to aviation turbine fuel prices, high inflation, rising wages, and the rupee's depreciation against the US dollar, which made imports more expensive, hurt the stock.

For the December 2022 quarter, the company reported a 6.6% YoY rise in revenue to Rs 13.3 bn. Net profit for the quarter declined to Rs 886 m, down 28.2 % YoY as high fuel costs hit margins, while demand also slowed.

Going forward, the logistics company is readying itself for the next round of expansion and increasing operations in China and Vietnam.

For more details, see the Blue Dart Express company fact sheet and quarterly results.

#5 Atul

Last on the list is Atul.

Atul is an improvement-driven, integrated chemical company serving about 6,000 customers belonging to 27 industries across the world.

The company has established subsidiary companies in the USA, the UK, China, and Brazil to serve its customers and thus enhance the breadth and depth of its business.

Shares of the company touched their 52-week low on 16 March 2023 due to rising freight expenses and skyrocketing raw material prices.

Due to this, shares of many chemical stocks have plummeted in the last month, with Atul being one of them.

However, in the past year, the shares have been on a downward trajectory, down 25.6%.


This falling trend was due to the sky-high valuation of the company, leading to profit booking.

For the March 2023 quarter, the company reported a 22.3% YoY decline in revenue to Rs 10.8 bn. Net profit for the quarter came in at Rs 884.4 m, down 40.5% YoY. This was due to an increase in raw material costs.

For the upcoming quarter, the company is looking ahead to an upsurge in demand by China plus one strategy of companies and the government's Atmanirbhar Bharat Abhiyan to reduce the dependence on chemical imports and make India more self-reliant.

For more details, see the Atul company fact sheet and quarterly results.

Should you invest in stocks trading at 52-week low?

Investing in stocks trading at their 52-week low can be a tempting proposition for many investors as they assume that such stocks may rebound and offer good returns.

However, it's important to note that just because a stock is trading at its 52-week low doesn't necessarily mean it's a good buy.

While stocks trading at their 52-week low may seem undervalued, there could be other factors at play, such as poor management, declining revenues, or unfavorable regulatory changes.

Therefore, investors need to exercise caution and avoid making hasty investment decisions based solely on a stock's current price level.

When considering investing in stocks trading at their 52-week low, it's important to conduct thorough research and analysis of the company's financials, including its cash flows, earnings, debt levels, and future growth prospects.

It's also essential to analyze the industry trends and economic conditions that may affect the company's performance.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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FAQs

Which are the top smallcap companies in India right now?

As per Equitymaster's Indian Stock Screener, these are the top smallcap companies in India right now.

These smallcap companies have been ranked as per their market capitalization. The higher the market cap, the higher the total value of the company.

Of course, there are other parameters you should take into account before forming a hard opinion on the stock valuation.

What are smallcap stocks?

According to the market regulator, smallcap stocks are companies which rank 251st and beyond in terms of their market capitalisation.

Investing in them is perceived to be risky. However, the potential for higher returns makes them an appealing investment avenue.

How much should one invest in smallcap stocks?

According to us, in a scenario of ideal allocation of funds, small cap stocks should not comprise more than 10% of one's total equity portfolio.

Further, we believe that a single small cap stock should ideally not form more than 2-3% of the total portfolio.

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