Profits of these multi-bagger small-caps have increased for fifth straight year. Should you invest?

This current market rally has been led mostly by blue-chip stocks. However, the focus is now shifting to the small-cap space as investors search for value picks. As most large-cap stocks are currently trading at premium valuations. Data from Ace Equity showed that select small-cap stocks have delivered handsome returns as their profits have risen consistently over the last five years. Here are the details.

Refex Industries is the top-performing small-cap in this list. Its profit after tax (PAT) has increased continuously in the last five years, from Rs 1 crore in FY18 to Rs 116 crore in FY23, while gross sales have increased from Rs 77 crore to Rs 1,629 crore in five years. This operational growth has also been reflected in the stock market's performance, as the share price jumped 580 per cent to Rs 807.2 on July 28, from Rs 118.75 a year ago. This industrial gases and fuels manufacturing company has a current market capitalisation of Rs 1,784 crore. 

Ion Exchange (India) is number two on the list, this is a Capital goods sector company engaged in Water treatment equipment manufacturing. Ion Exchange (India) has a current m-cap of Rs 7644 crore and the stock has jumped 182 per cent in one year to Rs 521. Its Profits have increased to Rs 197 crore in FY23 from Rs 40 crore in FY18, while revenues surged to Rs 1,990 crore from Rs 1,055 crore. 

It is followed by the Power sector company, Nava Ltd. It has a current market valuation of Rs 5,301 crore. This stock has jumped 82 per cent in one year. Nava recorded PAT increasing to Rs 928 crore in FY23 from Rs 238 crore in FY18. Its gross sales surged to Rs 3,528 crore from Rs 2,348 crore in the same period.

H.G. Infra Engineering is ranked fourth, as this stock has surged 63 per cent to Rs 936 from Rs 574 in a year. Its PAT has grown to Rs 493 crore from Rs 84 crore in five years, while sales have jumped to Rs 4,622 crore in FY23 from Rs 1,393 crore in FY18.

Southern Petrochemical Industries Corporation is in the fifth spot as its stock has surged 38 per cent in one year. It has a current market cap of Rs 1,349 crore and stock trading at Rs 66 as of July 28, 2023. Southern Petrochemical’s PAT increased to Rs 301 crore in FY23 from Rs 45 crore in FY18, while top line grew to Rs 2819 crore from Rs 1,984 crore in this duration.

Small-cap stocks have mostly underperformed the large caps for the past few years. As the Nifty50 has surged 77 per cent, while Nifty Smallcap 100 index has given 58 per cent return in five years duration since July 28, 2018. However, small-caps have started gaining momentum, and in the past year Nifty Smallcap 100 has jumped 30 per cent compared to 20 per cent rise in Nifty50.

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