10 Small Caps You Should Keep An Eye On This Earnings Season

Analysts expect the banking sector’s performance to revive in the fourth quarter. While cement, capital goods and infrastructure sectors are expected to outperform due to increase in cement prices and strong order inflows, earnings of information technology, pharmaceuticals, metal and consumer goods sectors may be impacted by a stronger rupee and higher raw material prices.

Here are the 10 small-cap stocks that, according to analyst forecasts tracked by Bloomberg, may report the best and the worst operational performance in the quarter ended March.

The small-cap stocks that are expected to witness the highest jump in Ebitda:

PVR

Lower base due to acquisition of SPI Cinemas, higher box-office collection, better content, higher contribution from the food and beverages division, adding more screens and rise in advertising revenue are expected to drive the operational growth for PVR Ltd. A cut in goods and services tax rate may also push growth.

• 12-month consensus target price: Rs 1,727 apiece

NIIT Technologies

Sustained flow of fresh orders, strong growth in travel and insurance segments and a recovery in banking and financial sector are expected to aid the fourth quarter earnings. The banking and financial segment is expected to revive on the back of large deal wins and a healthy pipeline. The currency headwinds, however, may lead to a margin contraction for NIIT Technologies Ltd.

• 12-month consensus target price: Rs 145 apiece

Strides Pharma

A higher growth in the U.S. and Africa businesses, better product mix and operating leverage are expected to lead to 71 percent growth in Strides Pharma Science Ltd.’s Ebitda in the three months ended March. A recovery in institutional business will also be key.

• 12-month consensus target price: Rs 577 apiece

Deepak Nitrite

The company’s new phenol and acetone plant commissioned in November is expected to boost its fourth quarter earnings. The new plant, operating at 80 percent capacity utilisation in the third quarter of financial year ended March, touched 100 percent in January, aiding the financials of Deepak Nitrite Ltd.

• 12-month consensus target price: Rs 341 apiece

JK Lakshmi Cement

Price hikes, strong volume growth, lower fuel and other costs are expected to aid JK Lakshmi Cement Ltd.’s Ebitda in the fourth quarter. Among mid-cap cement makers, JK Lakshmi Cement is expected to report the highest growth, according to Antique Stock Broking.

• 12-month consensus target price: Rs 351 apiece

Here are the small-cap stocks that are expected to witness the highest decline in Ebitda:

CEAT

Higher raw material prices and other costs due to commissioning of the truck bus radials plant during the quarter are expected to drag the operational numbers of CEAT Ltd., despite a growth in revenue.

• 12-month consensus target price: Rs 1,216 apiece

BSE

Lower volumes, weak market sentiment due to volatility, weak primary market and drop in market share in cash and derivative segments may impact BSE Ltd.’s operational numbers in the March quarter.

• 12-month consensus target price: Rs 838 apiece

Venky’s India

Flat prices of poultry products despite higher raw material costs and weak earnings in the oilseeds business are expected to lead to 21 percent drop in Ebitda of Venky’s India Ltd. in March quarter. The oilseeds business would be impacted because of a fall in price of palm oil.

• 12-month consensus target price: Rs 3,447 apiece

Lux Industries

Delaying sales of key summer brands due to extended winter may impact Lux Industries Ltd.’s Ebitda growth in the fourth quarter. Earlier, the company lowered its revenue growth guidance to 12-15 percent from 15-18 percent, citing unfavourable climatic changes.

• 12-month consensus target price: Rs 1,905 apiece

Laurus Labs

Higher raw material prices and lower sales in Hepatitis-C business due to increased competition and incremental overhead costs are expected to dent Laurus Labs Ltd.’s fourth quarter numbers.

• 12-month consensus target price: Rs 453 apiece

Note: The reasons that may affect the Ebitda performance of the small caps in the fourth quarter have been compiled from the research notes of Motilal Oswal, ICICI Direct, IIFL, Ambit Capital, Narnolia Securities, Antique Broking and Quantum Securities.