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  • Sep 27, 2023 - Top 5 Smallcap Growth Stocks to Watch Out for in 2024

Top 5 Smallcap Growth Stocks to Watch Out for in 2024

Sep 27, 2023

Top 5 Smallcap Growth Stocks to Watch Out for in 2024

Growth stocks in India have garnered significant attention, especially in recent years, as the country's economy continues to experience rapid expansion.

These stocks offer a great opportunity for investors to capitalise on India's economic progress.

Growth stocks are companies which grow their revenue and profit at a faster pace than the industry or even their peers.

Here are 5 smallcap growth stocks to watch out for in 2024.

#1 Fiem Industries

At the top of our list we have Fiem Industries.

Fiem is one of the leading manufacturers of automotive lighting, signalling equipment, and rear-view mirrors in India.

The company derives almost 96% of its revenue from the 2-wheeler segment and is credited with introducing LED lights into the segment.

Over the years, the company has developed a strong client roster of more than 50 OEMs, supplying to them since their inception.

The company enjoys an active domestic and export market.

Fiem Industries Financial Snapshot (2019-23)

  2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Revenue Growth (%) 16.54% -4.71% -11.39% 28.63% 18.03%
Operating Profit Margin (%) 10.91% 11.49% 11.16% 12.45% 13.98%
Net Profit Margin (%) 3.91% 5.70% 3.82% 6.04% 7.54%
Return on Capital Employed(%) 17.36% 16.39% 12.25% 21.35% 27.50%
Return on Equity (%) 12.23% 15.70% 8.57% 15.73% 19.93%
Data Source: Ace Equity

Between 2019-2023, the company's net sales and profits have grown at a CAGR of 8.4% and 21.6%, respectively.

The 5-year average return on capital employed (RoCE) and return on equity (RoE) stands at 18.9% and 14.4%, respectively.

The company has always maintained a strong balance sheet with no debt on its books.

Going forward, Fiem seems to be on a promising growth trajectory. With the robust expected expansion in the two-wheeler market and the diversification of its product range, the company is well-positioned to replicate its past track record.

The lighting major's recent agreement with Gogoro India to expand its product portfolio in the 2-wheeler EV segment only reaffirms this outlook.

Under this agreement, Fiem will gradually indigenise the hub motor assembly and motor control units. This will give it a firm foothold in the emerging EV market, boosting its growth prospects further.

To know more about the company, check out its financial factsheet and its latest financial results.

#2 Monte Carlo Fashions

Next on our list is Monte Carlo Fashions.

The company holds a commanding position in the winter woolen-wear market, with a market share exceeding 50% in India.

It also has a large cotton textile and apparel portfolio, which has expanded rapidly (100% growth between (2021-23) over the past few years.

This shift has helped the company mitigate the seasonality fluctuation in the business, diminishing its dependence on the woolen segment.

The massive transition in the business underscores the company's capacity for business diversification and its adeptness in expanding into new markets.

It also speaks volumes of its wide reach in the country, thanks to its extensive distribution network.

Additionally, it explains the rapid growth in the business. Between 2019-23, Monte Carlo's sales have grown at a 5-year CAGR of 13.9%. The net profit has grown at a 5-year CAGR of 14.3%.

The RoE and RoCE have also been strong, averaging 20.9% and 14.2%, respectively, over the past five years.

Monte Carlo Fashion Financial Snapshot (2019-23)

  2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Revenue Growth (%) 13.62% 9.27% -12.88% 44.74% 22.49%
Operating Profit Margin (%) 16.22% 16.95% 19.78% 18.23% 17.08%
Net Profit Margin (%) 8.29% 7.82% 9.66% 10.03% 9.43%
Return on Capital Employed(%) 17.75% 18.43% 16.64% 24.38% 22.92%
Return on Equity (%) 11.98% 12.19% 11.54% 17.66% 18.13%
Data Source: Ace Equity

Now, having successfully diversified its business, Monte Carlo aims to further expand into blankets, quilts, athleisure, and ultra-premium clothing. Additionally, the company intends to deepen its presence in existing markets.

To achieve this, Monte Carlo is establishing a new manufacturing facility in Jammu & Kashmir for home textiles, with a capital outlay of approximately Rs 1 bn.

The company is well-positioned to capitalise on industry-wide trends such as the increasing per capita spending on apparel driven by rising incomes, evolving consumer aspirations, and the ease of access to e-commerce. All these factors bode well for Monte Carlo.

To know more about the company, check out its financial factsheet and latest financial results.

#3 Transport Corporation Of India

Third on our list is the Transport Corporation of India (TCI).

TCI is the country's premier organised freight services provider with a pan-India presence. The company offers integrated logistics & supply chain solutions catering primarily to the healthcare, auto, chemicals, and retail industries.

It enjoys a wide presence across segments such as coastal shipping services, container & bulk cargo movements, and rail and road transportation services.

This integrated offering allows it to offer last-mile connectivity and a presence across all industry sectors capturing most of economic activities.

In fiscal 2024, the company plans to spend over Rs 3.7 bn across categories.

Transport Corporation of India Financial Snapshot (2019-23)

  2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Revenue Growth (%) 17.29% -1.27% 3.28% 15.87% 16.37%
Operating Profit Margin (%) 9.77% 9.59% 10.23% 13.15% 12.01%
Net Profit Margin (%) 4.37% 4.34% 4.65% 8.99% 8.48%
Return on Capital Employed(%) 14.89% 12.00% 12.52% 23.36% 22.96%
Return on Equity (%) 14.63% 12.43% 11.96% 22.65% 20.59%
Data Source: Ace Equity

TCI's well-diversified service offerings, multi sectorial presence and adherence to core business fundamentals have contributed to consistency in its past performance.

Between 2019-23, the sales have registered a 5-year CAGR of 10.9%. The net profit has grown by 25.8% over the same period.

This has led to strong returns with a 5-year average RoE and RoCE of 17.1% and 16.5% and helped the company enjoy a pristine balance sheet with negligible debt.

To know more about the company, check out its financial factsheet and latest financial results.

#4 MPS

Fourth on our list is MPS.

MPS is a publishing services company with over four decades of experience with major publishers around the world.

It is a B2B learning and platform solutions company powering education, and research for corporates.

The business comprises 3 separate segments such as content, platform, and e-learning.

Their clientele is primarily based out of USA (57% of revenues in fiscal 2023) and UK/Europe (35%), with the rest of the world accounting for a mere 8% of revenues.

MPS's business has grown over the past few years, primarily driven by inorganic growth. The company has made a total of 8 acquisitions in the last 10 years.

MPS Financial Snapshot (2019-23)

  2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Revenue Growth (%) 33.25% -9.36% 23.05% 7.07% 10.77%
Operating Profit Margin (%) 32.72% 29.83% 27.61% 31.27% 33.44%
Net Profit Margin (%) 20.97% 18.05% 13.86% 19.41% 21.79%
Return on Capital Employed(%) 24.17% 19.94% 25.52% 31.95% 37.45%
Return on Equity (%) 17.09% 14.28% 15.66% 23.29% 27.62%
Data Source: Ace Equity

Between 2019-23, the sales and net profit have registered a CAGR of 12% and 9.2%, respectively. The returns have been admirable, with a 5-year RoE and RoCE of 27.8% and 19.6%, respectively.

Going forward, the company aims to grow its business substantially. It aims to cross a total revenue of Rs 15,000 million, a 3x growth by 2027. This implies a 25% CAGR between 2024-2027.

The company has evolved from acquiring distressed assets to acquiring growth assets at compelling valuations. Additionally, it aims to upscale its customer base and cross-sell/upsell products.

To know more about the company, check out its financial factsheet and latest financial results.

#5 Control Print

Last on our list is Control Print.

Control Print is the leading manufacturer and marketer of printing machines, consumables (fluids), spare parts, and other related services.

It is one of the top four players in the country, boasting a 19% market share in the coding and marking solutions market.

Coding and Marking play a critical role in the overall manufacturing process.

Right from tracking products to preventing counterfeit products from selling in the market, the codes or marks also help customers with information on the quality of the product (expiry date), price etc.

Between 2019-23, the company's sales and net profit have registered a CAGR of 11.9% and 12.1%, respectively.

The 5-year average RoE and RoCE stand at 20.8% and 16.7%, respectively.

Control Print Financial Snapshot (2019-23)

  2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Revenue Growth (%) 0.62% 12.58% 3.48% 25.90% 19.25%
Operating Profit Margin (%) 23.40% 24.20% 24.66% 24.03% 26.26%
Net Profit Margin (%) 17.04% 13.51% 14.26% 15.65% 17.37%
Return on Capital Employed(%) 21.65% 18.30% 18.01% 21.69% 24.70%
Return on Equity (%) 17.14% 14.33% 14.46% 17.41% 20.14%
Data Source: Ace Equity

Going forward, Control Print plans to expand its footprint and drive growth by launching new products and increasing its installed base of printers.

Packaging regulations across nations mandate specific information to be displayed such as product name, MRP, ingredients, manufacturing, and expiry dates.

Recently, the Indian government added a new requirement for QR codes on domestic and imported Active Pharmaceutical Ingredients (APIs), further driving the need for an industry-specific solution.

With multiple tailwinds in its favour, the company is set to row at a fast pace.

To know more about the company, check out its financial factsheet and latest financial results.

Conclusion

Before you go about investing in growth stocks, it's important to do your research and understand the risks involved.

Moreover, bear in mind that the upcoming year 2024, being an election year, introduces an element of uncertainty. These events usually add volatility to the stock markets.

Changes in government policies and regulations resulting from the elections tend to impact the business environment, potentially affecting the performance of companies.

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

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There is a huge demand for electric batteries coming from the EV industry, large data centres, telecom companies, railways, power grid companies, and many other places.

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