Multibagger Smallcap stocks with low volatility amid market turmoil

by Trade Brains | Aug 6, 2023 | 10:00 am | News, Trending News | 0 comments

The market has been volatile the last two days, and in panic, which in part was caused by Fitch’s downgrade of the US credit rating and weak performance by a few key stocks. Sensex fell 1200 points and Nifty by more than 200 points. Amid such a selloff, investors lost close to Rs. 4.5 trillion.

Here are two multibagger small-cap stocks with strong fundamentals that have historically exhibited low volatility to the market and should be on your watchlist.

Venus is trading its 52W High, up 3% so far. has returned above industry average returns with its 1Y return at 224.1% (meaning, if a person invested Rs 1 Lakh 1Y ago in Venus, it would now be worth Rs ~3.24 Lakh) and YTD return at ~79.2%. Its market cap is currently Rs 2603 crores with its volumes being 2.2x its monthly and industry average today. Venus has a beta of 0.27 which means it is 73% less volatile compared to the market benchmark indices. Venus’ shareholding consists of 48% promoter holding, 13% DII & FII holdings and the rest are public float. Shareholding has been consistent over the past few quarters with no major insider or institutional selloffs.

Venus’ buoyant trend is supported by strong fundamentals; it has announced its plans for geographic expansion and its manufacturing capacities that would diversify its risk to country risk and achieving margin accretion; Recently it expanded its product offerings to include two more SKUs – which added 600 MT capacity that is 3x its previous capacity, and plans to add 400 MT p.m. additional capacity in the next 6 months that is part of its Rs 110 crore capacity expansion. The company also expects the higher exports contribution in FY2024.

Coming to performance, in FY23 Venus returned 43% YoY top-line growth from Rs 357 crores to 552 crores with EBITDA growth of 40% from Rs. 49.2 crore to Rs. 69.1 crore. Its Q1 performance (numbers compared to Q1 ‘23) was in line with guidance and consensus with 58% growth in revenue from 113.6 crores to 179.6 crores and EBITDA & PAT YoY expansion of ~91%; EBITDA from Rs. 14.4 crores to Rs. 27.6 crore; PAT from Rs. 9.1 crore to 17.4 crore. Venus’ ROE is also ~500 bps above industry average at 13.7%.

Venus Pipes & Tubes (“Venus”) manufactures and markets stainless steel pipes & tubes for various industrial and commercial applications across various business verticals; in India and exports its products to countries across APAC & Europe and few African & South American nations.

WPIL opened Rs. 113 above its previous close and is currently trading at its 52W high, up 2.5% so far and has hit 5% upper circuit for the 3rd day in a row. WPIL 1Y return at 189.5% and YTD return of 187.5%. This is further emphasised by its 3Y return of 718.3%. WPIL has had above weekly and monthly average volumes the past day and rising today. WPIL’s market cap is ~3300 crore with a beta of 0.23 that makes it 77% less volatile than the market benchmark indices. WPIL shareholding comprises – 70.8% Promoter holding, 8.65% holding by DIIs & FIIs, rest are public float. Shareholding has been consistent over the past quarters with no selloffs.

Performance wise, WPIL’s order book is robust with domestic orders at Rs. 39,550 crores, up 41% from 28,040 PY. Its international order book stands at Rs. 6610 crore – 67% Italy, 20% Australia, 13% South Africa.

WPIL revenue in FY23 grew 89.2% from Rs. 5,298 crore to Rs. 10,024 crore. Its EBITDA was even impressive at 121 bps expansion and 103.2% absolute growth from Rs. 855 crore to Rs. 1,760 crore. PAT margins expanded a 221 bps with absolute growth YoY – 123.8% from Rs. 639 crore to Rs. 1,430 crore.

WPIL Ltd (“WPIL”) is the market leader in Pumps & Pumping systems (22% of revenue) and 13th largest in Infrastructure Development & Operations (78% of revenue). It has a strong global presence in Italy, South Africa and Australia with 43.8% of its revenue being from international clients. Diverse revenue mix from developed and emerging markets provides diversified country risk exposures for WPIL and less sensitivity to domestic volatility. Moving forward, WPIL stated it is confident in its strong order flow for the FY.

Written by Sandeep R

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