Potential Multibaggers: 3 Small-Caps with ‘Highest’ Profit Margins!
When someone looks for potential multi-baggers, their hunting ground is often the small-cap space. These companies are relatively very small which gives them the inherent advantage to grow exponentially bigger in size as compared to companies that are already large.
However, it is difficult to screen these high-quality small caps as they have a relatively lesser history of going through different market cycles, limited financial data, not-so-experienced management etc. To make the job easier for you, I have listed down some of the highest-quality small caps in their business that are miles ahead of their peers.
The criterion for the selection of these stocks is, firstly to avoid any junk stock/penny stock or a bogus company, these stocks have been narrowed down from the . The second check on the quality front is their FY22 profit margins. The three stocks discussed below clocked the highest FY22 PAT margins from the 100 list.
Central Depository Services Limited
Central Depository Services India Ltd (NS:) is the first stock on the list. It is a registered depository with a market capitalization of INR 12,567 crores and is one of the only two such entities in India. This industry is a duopoly market which makes CDSL a no-brainer for those investors who are bullish on the increasing participation of retail investors in the stock market over the next few years.
The company has been increasing its net income at a yearly rate of 29.39% (last 5-year CAGR), leading to the highest-ever net profit of INR 311.18 crores in FY22. It is one of the very few small caps where FIIs hold a stake as high as 15.76%. The net profit margin for FY22 stood at a massive 51.36%, which is the highest of all 100 companies in the Smallcap 100 index.
Easy Trip Planners Limited
Easy Trip Planners Ltd (NS:) is an India-based online travel agency offering a comprehensive range of travel-related products and services for end-to-end travel solutions, including airline tickets, hotels and holiday packages. The company has a market capitalization of INR 8,499 crores and trades at a P/E of 80.26, which is a bit on the higher side.
The higher valuations is also backed by strong earnings, with the company posting a net profit of INR 105.9 crores in FY22, which was a mere INR 4 lacs in FY18. Over the last 5 years, the market share has also risen exponentially, from 0.46% to 9.37% and the profit margins for FY22 were recorded at 42.4%. As the Covid-19 pandemic seems out of the way, the increased travel would further help the company to scale to new highs.
UTI Asset Management Company Limited
UTI Asset Management Co Ltd (NS:) is INR 9,599 crores big asset management company. It is also the holding company for UTI Venture Funds Management Company, which manages venture funds and UTIInternational Ltd, which markets offshore funds to overseas investors. The company is also trading at a lucrative dividend yield of 2.78% which is rare to see in a small-cap.
Talking about the financial performance, the company clocked net revenue of INR 1,327.27 crores in FY22, over which it managed to garner a net profit of INR 534.29 crores, giving it a profit margin of 40.25%. FIIs hold a high interest of 29.28% in the company which further adds to the confidence in the management and future prospects of the company.
When someone looks for potential multi-baggers, their hunting ground is often the small-cap space. These companies are relatively very small which gives them the inherent advantage to grow exponentially bigger in size as compared to companies that are already large.
However, it is difficult to screen these high-quality small caps as they have a relatively lesser history of going through different market cycles, limited financial data, not-so-experienced management etc. To make the job easier for you, I have listed down some of the highest-quality small caps in their business that are miles ahead of their peers.
The criterion for the selection of these stocks is, firstly to avoid any junk stock/penny stock or a bogus company, these stocks have been narrowed down from the . The second check on the quality front is their FY22 profit margins. The three stocks discussed below clocked the highest FY22 PAT margins from the 100 list.
Central Depository Services Limited
Central Depository Services India Ltd (NS:) is the first stock on the list. It is a registered depository with a market capitalization of INR 12,567 crores and is one of the only two such entities in India. This industry is a duopoly market which makes CDSL a no-brainer for those investors who are bullish on the increasing participation of retail investors in the stock market over the next few years.
The company has been increasing its net income at a yearly rate of 29.39% (last 5-year CAGR), leading to the highest-ever net profit of INR 311.18 crores in FY22. It is one of the very few small caps where FIIs hold a stake as high as 15.76%. The net profit margin for FY22 stood at a massive 51.36%, which is the highest of all 100 companies in the Smallcap 100 index.
Easy Trip Planners Limited
Easy Trip Planners Ltd (NS:) is an India-based online travel agency offering a comprehensive range of travel-related products and services for end-to-end travel solutions, including airline tickets, hotels and holiday packages. The company has a market capitalization of INR 8,499 crores and trades at a P/E of 80.26, which is a bit on the higher side.
The higher valuations is also backed by strong earnings, with the company posting a net profit of INR 105.9 crores in FY22, which was a mere INR 4 lacs in FY18. Over the last 5 years, the market share has also risen exponentially, from 0.46% to 9.37% and the profit margins for FY22 were recorded at 42.4%. As the Covid-19 pandemic seems out of the way, the increased travel would further help the company to scale to new highs.
UTI Asset Management Company Limited
UTI Asset Management Co Ltd (NS:) is INR 9,599 crores big asset management company. It is also the holding company for UTI Venture Funds Management Company, which manages venture funds and UTIInternational Ltd, which markets offshore funds to overseas investors. The company is also trading at a lucrative dividend yield of 2.78% which is rare to see in a small-cap.
Talking about the financial performance, the company clocked net revenue of INR 1,327.27 crores in FY22, over which it managed to garner a net profit of INR 534.29 crores, giving it a profit margin of 40.25%. FIIs hold a high interest of 29.28% in the company which further adds to the confidence in the management and future prospects of the company.
