The Top 4 High Book Value Penny Stocks to Add to Your Watchlist

Since the start of 2022, the stock markets are experiencing major turbulence.

Inflation, geopolitical conflicts, skyrocketing energy prices, food insecurity and market volatility.

Investors have been torn between taking cover or chasing the most undervalued stocks.

Despite the economic problems, there are many compelling investments available for investors right now.

Till June 2022, the BSE Sensex had tumbled more than 11%. The market has recovered a bit.

Majority of large caps and even the best smallcap stocks suffered.

However, against all odds, some small-caps, microcaps, and penny stocks outperformed the market.

Several penny stocks have rallied this year and delivered multibagger returns.

Penny stocks do not have any fixed theoretical definition. However, these are mostly stocks that trade below Rs 100 per share. Also, the companies with less than Rs 10 bn market capitalisation can also fall into the penny stock category.

There are far too many penny stocks in the market. Choosing the right ones to invest in can be overwhelming for any retail investor.

On that note, check out our article on the top 5 penny stocks to watch out for in 2022.

Of course, you need to follow a disciplined approach to investing in penny stocks. This includes the company's fundamentals, promoter holding, past and current financial performance, and profitability.

Another key factor is the penny stock's current book value.

Book value is important in valuation. This is because it represents a fair and accurate picture of a company's worth.

It's determined using financial company data and isn't subjective. Investors and analysts get a reasonable idea of the company's worth.

High book value penny stocks usually trade below the book value per share. Value investors consider these to be undervalued stocks.

With that in mind, here is a list of the top 4 high book value penny stocks to watch out for in 2022.

#1 Gallantt Metal

Gallantt Metal is a trusted name in the steel industry. It is one of the fastest growing companies and is a name that is synonymous with the best quality mild steel billets, sponge iron, re-rolled products like TMT bars, pellet, cement and wheat products.

A part of the well known Gallant Group of companies, Gallant Metal merged with Gallant Ispat in May 2022 and boasts of an enviable client list.

Currently, the company enjoys dominance across the North Indian belt.

The company has a book value of Rs 96.6. The price to book (P/B) value stands at 0.8.

Shares of Gallant are currently trading at Rs 75.5.

As of June 2022, company promoters held a 68.7% stake with no shares having been pledged.

Gallantt Metal has delivered good profit growth of 29.4% compound annual growth rate (CAGR) over last 5 years.

#2 Hindustan Tin Works

With five decades of experience, Hindustan Tin Works is a leader in the metal packaging industry. The company is also a manufacturer and exporter of high performance cans, printed sheets, and related components. It's customers are consumer marketing companies in India and overseas.

It has a yearly production capacity of 260 m units. Its clients are spread across 30 countries in Africa, Australia, Europe, Middle East, New Zealand, USA, and parts of Southeast Asia.

The company boasts of an enviable list of global and domestic clients with the likes of Nestle India, Brooke Bond, Asian Paints, Indian Oil Corporation, Del Monte, Danone India, Haldiram, Reckitt Benckiser, and many more.

Currently, the company has a market capitalisation of Rs 851.2 m.

The book value per share of Hindustan Tin Works currently stands at Rs 171.9. This is high compared to its current market price.

The shares of Hindustan Tin Works are currently trading at Rs 83.9.

The P/B value ratio comes to 0.5.

Hindustan Tin Works has a promoter holding of 40.8%. The debt to equity ratio stands at 0.1, more or less consistent in the last five year period.

#3 Man Industries

Founded over 25 years ago, Man Industries is a flagship company of the Man Group. The company is a leading manufacturer and exporter of large diameter carbon steel line pipes in India.

Man Industries has a total installed capacity of 1 m tonnes with two plants in Anjar in the Kutch district of Gujarat and another in Pithampur, Madhya Pradesh.

With its experience and expertise, the company has a leadership position in the pipes sector. It's an approved vendor of leading domestic and global oil and gas facilities.

Man Industries has a current market capitalisation of Rs 5.5 bn.

The book value per share of the company currently stands at Rs 157.4. Between 2017 and 2021, the value has increased from Rs 104.8 in financial year 2016-17 to Rs 157.4 in financial year 2020-21. This is a 50.2% jump in a 5-year period.

Shares of Man Industries are currently trading at Rs 93.4. At the current price, the price to book value is 0.6.

Despite the promoter holding dwindling to 45.7%, the company boasts of a strong leadership team at its helm.

The company has reduced debt and has consistently maintained a healthy financial risk profile.

Revenue is expected to grow at a CAGR of 6.2% up to 2027. The global demand for steel pipes is on the rise.

Demand for pipes is rebounding domestically too with the central government announcing a series of expansion projects of the natural gas grid from 18,000 km to 34,500 km.

#4 Navkar Corporation

Navkar Corporation is one of India's fastest growing logistics solution providers. It has been operating in the country since 2006.

The company is engaged in the business of a container service operation and a container freight station (CFS). It offers a range of services like cargo handling, container storage and warehousing.

It houses a private railway freight terminal. This enables it to transport cargo throughout India using the Indian rail network.

Additionally, the company offers a range of customised value added solutions like packing, labelling, bar-coding, palletising, fumigation as well as repair and maintenance services.

Navkar has worked towards building strong relationships with most of the leading carriers to get a competitive edge in the market.

The current market capitalisation of the company stands at Rs 11.6 bn.

Navkar has a decent book value of Rs 125 per share. For the last five years, this a consistently increased from Rs 101.6 per share in 2016-17.

The P/B value stands at 0.6.

The share price of Navkar Corp is currently Rs 77.85.

Navkar Corporation boasts of a strong promoter holding of 63% and it has not undergone any significant changes in its shareholding pattern in the last 6 months.

The company continues to maintain an efficient working capital cycle. It has strong liquidity driven by internal cash generation.

Are Penny Stocks a Good Investment at This Point?

When it comes to investing in penny stocks, there is a feeling of hesitancy among retail investors at present.

The fear of losing money on a company that is yet to show established returns in the long term is understandable.

No doubt there is an element of risk involved. But isn't that the same for all financial products that are market linked?

The case for penny stock investing is strong not only because of its potential to deliver high returns in a relatively short amount of time. It also adds to the diversification of your portfolio. This is equally important when your goal is to compound wealth in the long run.

Imagine only having bluechip stocks in your portfolio which come at a premium price and deliver considerably lower returns compared to penny stocks.

While you can depend on a steady flow of returns over a long period, the possibility of compounding your wealth becomes significantly limited with this approach.

If compounding wealth is a core financial goal via penny stocks, check out our recent article on the 10 best penny stocks in India to add to your watchlist this year.

So, the real question is if you do go ahead with penny stock investing, how can you avoid the risk of loss?

Investing in penny stocks does not really demand a separate approach or framework. You need to apply all the criteria you would in case of any other stock.

In addition to the usual checklist, it's a good idea to look at the book value of the penny stocks you have shortlisted.

Ideally, the best penny stocks to buy are those with a price to book value less than 1. This means they are likely trading less than their intrinsic value. So when the tide turns, you have the opportunity to make some killer returns.

Don't go for bulk investing in multiple penny stocks at the very onset. Choose two to three stocks that will help you earn meaningful returns and lower your risk of losing money.

To know more, check out the below video by Co-head of Research at Equitymaster, Rahul Shah, where he reveals his pick of top penny stocks in this market.

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...