3 Mid/SmallCap Stocks with 30-40% Upside Potential


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3 Mid/SmallCap Stocks with 30-40% Upside Potential

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1) Castrol India Ltd (Current Price: 114 Rs. | Target Price: 140 Rs. | Upside potential: 23%)

Brief about Castrol: Castrol is the world leading manufacturer, distributor and marketer of premium lubricating oils, greases and related services to automotive, industrial, marine, aviation, oil exploration and production customers across the world.

Specific Reason(s) for selecting Castrol: The company has delivered better than expected quarter numbers in Q3CY20 Revenue up 4% to Rs 883.1 crore, Net profit up 9% to Rs 204.6 crore). The company is adding new products, with improved formulations and performance across categories. They are ready with BSVI range of products across categories to be launched soon. They have also entered into agreements for EV fluids with OEMs in India including MG Motors and Tata Motors, as well as to supply lubricants to various OEMs for their BS-VI compliant vehicles.

Fundamentals: Very Strong

Market Cap: ₹ 11,479 Cr. | Debt to Equity: 0.00 Cr. | ROCE: 90.7 % | ROE: 65.4% | Free cash flow 5years: 3,169 Cr. | Interest Coverage Ratio: 237 | Pledged percentage: 0.00 % | Promoter holding: 51 % | Inventory turnover ratio: 4.61 | Company has been maintaining a healthy dividend yield of 4.74%

Technical Analysis: 14 out of 28 major indicators show that this stock is Bullish on daily charts.



2) Swaraj Engines Ltd (Current Price: 1425 Rs. | Target Price: 1900 Rs. | Upside Potential: 34%)

Brief about Swaraj Engines Ltd: Swaraj Engines is in the business of manufacturing diesel engines and hi-tech engine components. Diesel Engines are specifically designed for tractor application.

Specific Reason(s) for selecting Swaraj Engines: Swaraj Engines Posts Highest Ever Quarterly Sales with 30% Jump in PBT. The company is engaged in the business of manufacturing diesel engines and hi-tech engine components, specifically designed for tractor application. A recovery in tractor industry (due to robust Rabi crop production, hike in MSP and the forecast of a normal monsoon) going ahead and it believes that will benefit players like Swaraj Engines. The company has healthy a balance sheet along with free cash flow and higher profitability and is trading at reasonably lower valuations.

Fundamentals: Very Strong

Market Cap: ₹ 1,736 Cr. | Debt to Equity: 0.00 Cr. | ROCE: 39.3 % | ROE: 30% | Free cash flow 5years: 298 Cr. | Pledged percentage: 0.00 % | Promoter holding: 52.2 % | Inventory turnover ratio: 14 | Company has been maintaining a healthy dividend payout of 72.53%

Technical Analysis: 10 out of 28 major indicators show that this stock is Bullish on weekly charts.

See also: 4 Debt Free Stocks With 30% Upside Potential in 2020

3) DCM Shriram Ltd (Current Price: 340 Rs. | Target Price: 500 Rs. | Upside potential: 47%)

Brief about DCM: DCM Shriram comprises primarily of Agri-Rural Business, Chlor-Vinyl Business, and Value added business such as Fenesta Building Systems- UPVC Windows & Doors. DCM Shriram is into sugar, fertilisers, seeds and chloro-vinyl businesses, among others.

Specific Reason(s) for selecting DCM Shriram:

i) Company's strong fundamentals
ii) Diversified business
iii)The company has started implementation of a 120-megawatt coal-based power plant at Bharuch that will improve cost-competitiveness at the chemicals complex at Bharuch.
iv) Discontinuation of trading in bulk fertilisers and sale of international seeds business in Indonesia and Vietnam have helped in reducing losses and have improved the focus on core business.

Fundamentals: Strong

Market Cap: ₹ 5,279 Cr. | Debt to Equity: .28 Cr. | ROCE: 18.7 % | ROE: 19% | Free cash flow 5years: 348 Cr. | Pledged percentage: 0.00 % | Promoter holding: 67.4 % | Inventory turnover ratio: 2.37 | Company has been maintaining a healthy dividend payout of 18.30%

Technical Analysis: Stock has witnessed Golden Cross for the first time since March 2019.

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Akshay Seth
Research Analyst (SEBI Regd.)
Linkedin | akshay.equity@gmail.com

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