Praj Industries, PNC Infratech, CCL Products: Axis Securities bets on these 4 smallcap stocks for up to 60% return

The financial year 2022-23 will be remembered as one of extraordinary upheaval for investors. Indian markets were volatile amid high inflation, aggressive monetary policy stance and the Russia-Ukraine crisis. Over the past one year, Sensex gained 0.72 per cent while the Nifty 50 was down 0.6 per cent. The broader markets were not able to give positive returns. The S&P BSE Midcap index was down 0.18 per cent and the S&P BSE Smallcap index declined 4.46 per cent.

According to Axis Securities, the broader market is likely to gain momentum in the second half of the year on account of more visibility in demand and favourable macroeconomic conditions. "2023 is likely to be a play of bottom-up stock selection or the structural stories with superior earnings visibility, it added. 

The brokerage firm has come out with 4 small-cap stock ideas that can deliver a return of up to 60 per cent. Take a look:

1) Healthcare Global Enterprises

Target price: Rs 330
Monday's closing price: Rs 272.60
Upside: 21%

Axis Securities believes that Healthcare Global Enterprises is expected to turn around its operating profitability with Operating EBITDA Margins improving by 680 bps over FY21-FY24E, majorly driven by operating leverage driven by the increase in Average Occupancy rates, increase in Average Revenue Per Occupied bed (ARPOB) led by the increase in international patients and high-end works, and operating leverage in new centres that have already achieved breakeven. 

"Given variable and fixed costs comprise 35% and 65% in hospitals respectively, we believe strong operating leverage in new centres may improve margins to 12%-15% over FY21-FY24E," it added.

2) Praj Industries

Target price: Rs 550
Monday's closing price: Rs 341.50
Upside: 61%

The brokerage firm highlighted that an increased interest in grain-based distilleries and decarbonization impetus is auguring well for Praj along with development in another key 
verticals such as CPS, ZLD & High Purity gaining traction. 

It added that Praj is a key beneficiary of multiple tailwinds provided by the bio-economic revolution, giving strong growth &revenue visibility for the next 3-5 years. The company's key growth levers remain strong.

3) CCL Products

Target price: Rs 650
Monday's closing price: Rs 577.90
Upside: 12%

Axis Securities remains positive on CCL Products given its strong footing in the International markets, cost-efficient business model, doubling of Vietnam's capacity from the current 13,500 MT to 30,000 MT and new capacity expansion in India leading to strong volume growth visibility for the next 2-3 years, capacity addition in the value-added products (FDC and small packs), and foray into high-margin branded retail business (Continental Coffee, Plant-based meat protein).

4) PNC Infratech

Target price: Rs 390
Monday's closing price: Rs 284.50
Upside: 37%

Axis Securities believes that the Road sector is witnessing good development owing to 
increased government thrust on infrastructure investment. Furthermore, the tightening of norms in bidding on road projects by the NHAI augurs well for an organised player such as PNC. 

Considering its strong and diversified order book position, healthy bidding pipeline, new order inflows, emerging opportunities in the construction space, the company’s efficient and timely execution and strong financial credence, the brokerage firm expects PNC to report Revenue/EBITDA/APAT CAGR of 18%/22%/29% respectively over FY22-FY25E.

Also read: YES Bank shares: Private lender's stock in focus after March quarter updates