Sawaka Business Machines(BSE Code 531893)

A research analyst who concentrate on studying penny stocks favours looking at Sawaka Business Machines, the Ahmedabad –based company listed on both BSE and NSE operates scrap trading business and focuses on sourcing different grades of copper scrap, aluminium scrap, SS Scrap, and other metal scrap as well as offers trading and supplying cotton bales and export services.

The small cap company with a market capitalisation of only Rs. 14 crore had a turnover of Rs. 3.32 crore in the year ended March 2022 on which it had earned a net profit of Rs. 41 lakh. Earlier the company was in the red. Share price is quoted around Rs. 1.25.

However, the management headed by Sheetal Shah Chairman and Managing Director has sprung a pleasant surprise the purpose behind which is difficult to be understood by shareholders. The company has proposed a bonus issue in the ratio of 10:100 i.e. ten bonus shares for every 100 shares held besides splitting the face value of shares from Rs. 10 to Rs. 1. This means that the company has subsidized one equity share of the face value of Rs 10 into 10 shares of Rs. one each.

Does this indicate that the management is planning something big for the company to lift the tiny company from the small to and promote it to medium size? No one knows but The company has put up somewhat better performance in the fiscal year 2022 as compared to earlier years is being considered a significant indicator. The question being asked in the market circles is whether the promoters who have already sold their stake in the company (which is now just around 7 per cent) buy them back from the market? Even institutional investors have also deserted the company by selling their stake. One fails to understand what is in the mind of promoters when they have decided to make a bonus issue and split the stock from 1 to 10. Some observers point out that one should take this positively. Promoters must have something in mind, they say and add this is the time to buy these shares which are available at very attractive prices.

(CMP Rs. 1.18, 52 week H/L Rs. 4/1, BV Rs. 1.10, FV Re. 01)

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Nupur Recyclers Ltd.(NSE Code - NRL)

A research analyst strongly recommends investment in Nupur Recyclers which has made two bonus issues this year both in the ratio of 1:1. The company is a leading name in the field of trading and casting non-ferrous metal scraps such as shredded zinc scraps, sinc die-cast scraps, suric scrap and aluminium sorba grades.. The company recycles nonferrous metal scraps to make quality products for tis end customers. Being a strong believer in innovation, research and development, the company has made significant investments towards the same especially in the field of sustainable recycling to ensure that green technologies are developed and deployed.

The company has started doing well incorporated in 2018-19, the company could gross its sales turnover at Rs. 13 crore in the fiscal 2020 which shot up to Rs. 104 crore in the fiscal 2021 and further to Rs. 159 crore in the the fiscal 2022 earning an operating profit of Rs. 14 crore in the fiscal 2021 and Rs. 23 crore in the fiscal 2022. The comnay which came out with an IPO in December 2021 gave a pleasant surprise to its investors by making two bonus issues in the fiscal 2022 – in February and December 2022 – the research analyst recommends a strong ——— on these shares.

(CMP Rs. 280.00, 52 week H/L Rs. 368/124, BV Rs. 90.40, FV Rs. 10)

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Federal Bank(BSE Code 500469)

The research outfit of a leading brokerage house is bullish on Federal Bank and feels that the time has come for rerating the south-India based (headquartered in Aluva, Kochi– Kerala)-based on the strength of its consistent steady performance, potential value unlocking in Fed Fina (NBFC subsidiary of the bank) via an IPOcould be an additional calalyst for the stock and may help to strengthen capital ratios currently its tier-I ratio is 12.6 per cent.

According to the brokerage, key factors such as loan growth acceleration, margin improvement, reduction in impaired loans in turn lower credit cost, and stable assetquality outlook, required for re-rating of the stock have already played out. We believe now consistent steady performance could drive re-rating in the stock as the probability of improvement in return ratios is less likely going forward. The bank is upbeat about the credit growth outlook and has guided for ~20% credit growth for FY2023E. We believe higher-rated corporate book along with continued focus to increase its retail mix with higher-yielding businesses such as commercial vehicles, credit cards, personal loans, and micro credit are expected to augur well for the bank’s loan growth going ahead. Fintech partnership and digital platforms are helping in gaining more traction in the card business and personal loans, CV/CE, gold loans, and microloans. Asset quality is expected to remain stable going forward. On the margin front, margins are likely to peak out at the end of FY2023E, led by the faster repricing of loans over cost of funds.

Shares of the company are quoted in the price range of Rs. 125-130. The brokerage house expects around 25 per cent rise in the share price within a year.

(CMP Rs. 127.90, 52 week H/L Rs. 143/78, BV Rs. 95.90, FV Rs. 02)

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