5 Smallcap Stocks Undergoing Dramatic Change. It's Time to Track Them...

Small-cap stocks are the future. At least, that's the adage we always hear. After all, some of the largest companies today were smallcaps at one time.

It's not unusual for a good smallcap stock to turn into a midcap within a year.

However, not all smallcaps become largecaps. What separates the ones that do from the ones that don't is the ability to pivot their businesses in a direction that allows them to thrive for the long term.

Here are five smallcap companies undergoing a dramatic change. Read on to find out why they are worth tracking.

#1 Kabra Extrusiontechnik

First on our list is Kabra Extrusiontechnik.

The company is a market leader in manufacturing plastics extrusion machinery.

In simple words, KET manufactures and installs for its clients the machines that make plastic pipes and packaging films. These end products cater to multiple industries - agriculture, irrigation, housing, infrastructure, construction, telecom, and flexible packaging.

While the plastics and packaging industry have been driving the company's revenue so far, what makes the company more interesting is it's foray in the electric vehicle (EV) space.

In the financial year 2021, the company decided to venture into the electric vehicle (EV) segment via its battery division, Battrixx.

Battrixx is positioned to provide a wide range of advanced Li battery packs with smart battery management system (BMS).

Apart from this, the company's financials provide immense comfort. It has managed to grow sales at a 18% CAGR over last three years. Its operating cash flows have also been consistently positive.

The debt on the balance sheet has been negligible. Further, the company has been paying dividends consistently, with the average pay-out ratio over last three years at 43%.

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

#2 Wardwizard Innovations & Mobility

Second, on our list is Wardwizard Innovations & Mobility.

The company focuses on providing clean and greener alternatives through two of its brands - Joy E-Bikes and Vyom Innovations.

Under its flagship brand, Joy e-bikes, the company sells more than 10 varieties of electric bicycles to suit different categories of customers. Some of its brands are Glob, Beast, and Thunderbolt, etc.

It recently inaugurated a state-of-the-art plant at Vadodara, Gujarat in January 2021 capable of producing about 4 lakh electric two-wheelers per annum.

Ward wizard is now foraying into the three-wheeler and four-wheeler electric vehicle space. The company began the production of its passenger three-wheeler model in the September 2022 quarter.

It also plans to strengthen its EV ancillary with the right partners and start developing lithium ion cells in India.

Wardwizard Mobility turned profitable in the financial year 2021 and has since reported strong numbers. For the financial year 2022, the company reported revenue growth of 370% YoY and profit growth of 300% YoY.

It has healthy return ratios with RoE (return on equity) at 19.1% and RoCE (return on capital employed) at 27.4%.

It also has no debt on its books.

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

#3 Mayur Uniquoters

Third on our list is Mayur Uniquoters.

The company is a market leader in the artificial leather market. It caters to the automotive, footwear, and bags industries.

It enjoys a great clientele. It's the only company in India, to qualify as a supplier to global firms like Mercedes, Daimler, BMW, and Volkswagen.

Mayur Uniquoters has recently forayed into manufacturing of Poly Urethane (PU) coated fabric under Phase-I.

As compared to PVC coated fabric, PU coated fabric has closer resemblance to natural leather with better realisations. PU coated fabric finds application across industries like footwear, fashion accessories, furnishing, and automotive upholstery.

Currently, more than 90% of PU coated fabric is being imported from China with the presence of very few domestic manufacturers with limited capacity. The company foresees this as a cross-selling opportunity to its existing PVC fabric customers.

While the sales have grown at a 4 year CAGR of 4.1%, profitability has been erratic. The business has suffered in the near term due to issues like chip shortage, rise in raw material prices, and high freight costs.

However, the company is focused on turning this around, driven by a healthy demand environment, abating raw material costs, and operating leverage.

It also has no debt and enjoys a strong cash flows.

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

#4 Mold-Tek Packaging

Fourth on the list is Mold-Tek Packaging.

A one-stop shop for packaging products, Moldtek is the leader in rigid plastic packaging in India. The company manufactures injection moulded containers for lubricants, paints, food, and other products.

Post a successful entry and execution in food and FMCG packaging, the company is again shifting gears. It has recently announced entry into pharma (domestic and OTC) packaging.

The margin profile of the pharma segment is superior compared to food and FMCG (F&F) products. Pharma also enjoys better premium pricing compared to F&F.

Mold-Tek has enjoyed a smooth road to profitability. The company's sales have grown at a 4-year CAGR of 17.1%, while the net profit has grown at a 4 year CAGR of 23.3%.

The return on equity has also been strong, averaging 17.2% over five years. The company has rewarded its investors well, sporting a five-year average dividend yield of 1.3%.

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

#5 Praj Industries

Last on our list is Praj Industries.

The company is the undisputed market leader in the domestic ethanol plant installation and equipment business as well as the domestic breweries installation segment.

It's executing India's first ever second-generation ethanol plant for Indian Oil at its Panipat facility. It has also inked an MoU with the company to set up biofuel production facilities, including CBG, biodiesel, and ethanol.

While ethanol is the mainstay of the business, Praj has diversified into water and wastewater management, critical process equipment, bio-nutrients, HiPurity Systems with the objective of reducing its dependence on core business of ethanol-based products.

The company has also started two technology initiatives, Bio-Mobility & Bio-Prism.

Under Bio-Mobility platform, it's pursuing developments of next gen and future fuels including Sustainable Aviation Fuel & Bio-Hydrogen. As a part of the Bio-Prism platform, the focus is on Bioplastics, a sustainable alternatives to plastics.

In the financial year 2022, the company focused on delivering solutions for complex injectables, fermentation, and other segments in the Biologics space.

Praj Industries has a healthy financials. The company's sales have grown at a CAGR of 21% in the last five years while net profit has grown at a CAGR of 27%.

The company is also almost debt free and its return ratios are strong with RoCE and RoE at 23% and 17% respectively.

To know more, check out company factsheet and latest quarterly results.

Investment Takeaway...

It's hard to find a company that doesn't change over time.

Some changes can be good, some can be bad. But when you're buying or selling stocks, the changes can mean big gains or equally big losses on your investments.

Before investing in any company, make sure you study the fundamentals and growth prospects thoroughly. Check whether the smallcap stock is undervalued as those make for the best investment.

Since small-cap stocks interest you, here's a proven approach on investing in small-cap stocks.

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

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...