Best Low PE Small Cap Stocks: Have you ever bargained for a price with the notion that this product is overcharged? Or felt happy when you get a good product at the minimum price? Most of you might say yes. Because in general, we try to find value for money in all products or services we buy or use.
Similar is the case of buying stocks in the market. But, do you know how to find out whether a stock is overvalued or not? If not, don’t worry, we have got your back. In this article on the best low PE Small Cap Stocks in India, let us find out the best small-cap stocks that are trading at a value which is lower than the industry average.
Best Low PE Small Cap Stocks in India
In this article on the best low PE Small cap stocks in India, firstly we shall understand what is a PE ratio and how is it used in investment decisions, eventually, let us look into the list of the best low PE Small cap stocks in India and their financials. Keep reading to know more!
The PE ratio is the ratio of the current price of a stock to its Earnings per share (EPS). To make it more simple, the PE ratio tells us how much the investor is willing to pay to earn one rupee of profit from the stock.
For example, if the PE of a stock is 12, it means the investor is paying Rs 12/- for every 1 rupee earned from that stock.
Although, there is no hard and fast rule or formula to say that a particular stock has good P/E. Generally, the stocks with a higher PE ratio indicate the overvaluation of the stocks. On the contrary, the stocks with lower PE indicate that stocks have more growth potential.
Best Low PE Small Cap Stocks #1 – GSFC
Gujarat State Fertilizers and Chemicals Limited is an Indian-based chemicals and fertilizers manufacturing company, which is owned by the Government of Gujarat. The company was incorporated in 1962 with the head office at Vadodara, Gujarat.
The company majorly operates under two segments that are fertilizer manufacturing and industrial products like plastic and synthetic rubbers and many more.
GSFC is the largest manufacturer of Nylon-6, which is useful for auto components and packaging. It is the only manufacturer of HX Sulphate Crystal, which is useful for the pharma sector.
Under fertilizers, it produces neem urea, gypsum, ammonium sulphate, and many more. Its industrial products include Nylon-6, Argon gas, HX sulphate crystals, and many more.
Its expansion plans include the Installation of a 400 MTPD Sulphuric Acid plant at Vadodara to meet the captive requirement. The plant is envisaged to provide 440 MTPD steam to the complex to reduce the load on NG-fired boilers, Install 400 MTPD Ammonium Sulphate plant at Vadodara to capture the rapidly expanding market, and many more.
If we look into the financials of the company we see that there is an increase in sales on YoY basis for the last 5 years from Rs 8,490 Crs in FY19 to Rs 11,368 Crs in FY23. Besides, the profits of the company have more than doubled from Rs 493 Crs in FY19 to Rs 1,265 Crs in FY23.
It is a small-cap company backed by the government with a low P/E ratio of 5.10 compared to the fertilizer industry P/E of 10.9 Additionally, it is a debt-free company which is a sign of a fundamentally strong company.
|CMP (In Rs)||166.85||Market Cap (in Rs Crs)||6,381|
|Stock P/E||5.1||Sector P/E||10.9|
|EPS (In Rs)||31.77||ROE (in %)||10.51|
|ROCE (in %)||12.11||Book Value (In Rs)||302.19|
|Promoter Holding (%)||37.84||Price to Book Value||0.52|
|Debt Equity Ratio||0||Face value (in Rs)||2|
Best Low PE Small Cap Stocks #2 – PTC India
PTC India Financial Services, which has been promoted by PTC (Power Trading Corporation) India Ltd is a leading power trading solutions provider in India. It was established in 1999 as a Government of India-initiated company with a public-private partnership company. It is a registered NBFC under the RBI and classified as an Infrastructure Finance Company (IFC).
Being an IFC, the company is engaged in debt financing and fees-based services to companies with projects in the power sector and related areas across the entire energy value chain. It also provides both fund and non-fund-based services like underwriting debts, acting as a syndicator, DPR consultant, facility agent, and many more financial advisory services.
The company’s profit has increased by 35 % from Rs 129 Crs in FY22 to Rs 175 Crs in FY23. Even though the sales have declined from Rs 952 Crs to Rs 790 Crs. The company has cut down its expenses considerably to keep up the net profits.
Although the Debt equity ratio of 2.09 is slightly higher, the NPAs (Non-Performing Assets) of the NBFC are on a declining trend, indicating a recovery in financial performance. It is one of those stocks with a low P/E of 6.3 as compared to a sector P/E of 29.7. This shows the potential for growth in the longer term.
|CMP (In Rs)||20.1||Market Cap (in Rs Crs)||1,298.05|
|Stock P/E||7.34||Sector P/E||29.77|
|EPS (In Rs)||2.74||ROE (in %)||5.74|
|ROCE (in %)||31.49||Book Value (In Rs)||37.98|
|Promoter Holding (%)||64.99||Price to Book Value||0.46|
|Debt Equity Ratio||2.09||Face value (in Rs)||10|
Best Low PE Small Cap Stocks #3 – NALCO
National Aluminium Company Limited (NALCO) is a Schedule ‘A’ Navratna CPSE established on 7th January 1981. The company is one of the largest integrated bauxite-Alumina-Aluminium-Power Complex in the country. It has installed 198 MW wind power plants at various locations in India.
NALCO is a pioneer to venture into London Metal Exchange(LME) in 1989. The Company has a 68.25 lakh TPA Bauxite Mine & 21.00 lakh TPA (normative capacity) Alumina Refinery and a 4.60 lakh TPA Aluminium Smelter & 1200MW Captive Power Plant located in Odisha. Presently, the Government of India holds a 51.28% stake in the company.
Coming to the financials the has continuously earned profits for the last 35 years since its inception. The sales of the company have increased from RS 14,180 Crs to Rs 14,254 Crs from FY22 to FY23. Still, we see a reduction in net profits from Rs 2,951 Crs to Rs 1,544 Crs which is a result of an increase in overheads.
Along with being a debt-free company, it has shown an increasing CAGR in net profit over the last 2 years from 30.5% to 234.27 %. It is a stock with an average P/E of 10.59 Since the company has been consistently profitable, it may be considered as a fundamentally strong company.
|CMP (In Rs)||82.75||Market Cap (in Rs Crs)||15,335|
|Stock P/E||10.69||Sector P/E||22.37|
|EPS (In Rs)||7.81||ROE (in %)||10.92|
|ROCE (in %)||13.34||Book Value (In Rs)||71.47|
|Promoter Holding (%)||51.28||Price to Book Value||1.17|
|Debt Equity Ratio||0||Face value (in Rs)||5|
Best Low PE Small Cap Stocks #4 – Banco Products
Banco Products (India) Ltd is a manufacturer and supplier of engine cooling modules and systems for automotive and industrial applications for both the domestic as well as international markets. It was established in 1961 as a private limited company. Later it grew large as a major manufacturer and exporter of auto ancillaries. It is recognized as a Star Export House by the Ministry Of Commerce and Trade, Government of India.
The company has 2 plant setups in India at Bhaili and Waghodia. Its products include engine cooling and sealing systems like transmissions, Steel fiber composite gaskets, and many more. It covers the market segments of two-wheelers, three-wheelers, agriculture tractors, and many more and is a preferred choice of OEMs both in India and abroad.
The financials of the company shows an overall improvement in key metrics such as revenues and net profit. The revenue of the company has increased from Rs 1,958 Crs to Rs 2,331 Crs from FY22 to FY23 and the net profits have also followed the way with an increase of 54.6% from Rs 152 Crs to Rs 235 Crs.
Going forward, it has an average P/E of 9.42 compared to a sector P/E of 32.04, indicating that the company is neither undervalued nor overvalued. The company has performed well over the years and given good returns to its investors with an ROCE of 26.21% and an ROE of 26.21% for FY23.
|CMP (In Rs)||307.6||Market Cap (in Rs Crs)||2,207|
|Stock P/E||9.37||Sector P/E||32.45|
|EPS (In Rs)||32.94||ROE (in %)||23.52|
|ROCE (in %)||26.21||Book Value (In Rs)||140.03|
|Promoter Holding (%)||67.88||Price to Book Value||2.21|
|Debt Equity Ratio||0.29||Face value (in Rs)||2|
Best Low PE Small Cap Stocks #5 – HUDCO
Housing and Urban Development Corporation Ltd. (HUDCO) was incorporated as a fully owned Government Company with the motto of financing Housing and Urban development projects in the country.
It is a housing finance institution that was incorporated in 1970 as a private limited company to lend long-term finance for the construction of houses for residential purposes of economically weaker sections of the society in the country. Further, it also provides consultancy services for major urban development programs of the government.
The financial performance of the company has increased on a YoY basis from FY22 to Fy23. Revenue has increased from Rs 6,954 Crs to Rs 7,049 Crs. Although there is a downfall in the profits from Rs 1,716 Crs to Rs 1,701 Crs it is due to the increase in total expenditure.
Overall we observe a slightly higher debt-equity ratio of 4.25. But, the positive operating revenue margin that has increased over the year from 96% to 99 % can compensate for it in the long term. It has a P/E of 6.87 which is the lowest among its peers in the industry.
|CMP (In Rs)||58.4||Market Cap (in Rs Crs)||12,161|
|Stock P/E||7.15||Sector P/E||19.24|
|EPS (In Rs)||8.5||ROE (in %)||11.86|
|ROCE (in %)||9.79||Book Value (In Rs)||80.76|
|Promoter Holding (%)||81.81||Price to Book Value||0.76|
|Debt Equity Ratio||4.25||Face value (in Rs)||10|
List of the top 10 low P/E Small Cap stocks in India
|PTC India Financial Services||6.03|
|Banco Products (India) Ltd||9.42|
|Karnataka Bank Ltd||3.92|
|Gujarat Minerals Development Corporation Ltd||4.28|
|Sunflag Iron and Steel Company Ltd||2.41|
|Manappuram Finance Ltd||6.72|
|Gulf Oil Lubricants India Limited||9.6|
In this article on the best low PE Small cap stocks in India, we have discussed what is PE and how is it useful in the valuation of stocks. In the latter part, we have seen some of the best low PE Small Cap stocks in India. Most of the time stocks with lower P/E indicate growth potential in the future.
Nevertheless, P/E is not the only measure for the valuation of stocks. As a cautious investor, one must examine other ratios like turnover ratios, growth ratios, and many more to know the financial health of the company.
Written By – Bhagyalakshmi Patil
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