Penny Stocks to Watch in 2023: 4 Multibaggers

Penny Stocks After an extremely tumultuous first half, the markets began to show signs of recovery in July 2022. The BSE Sensex returned about 10% in the previous month after dropping nearly 14% in the previous six months. Many investors avoided the market during the drop, expecting large losses. Even the most popular penny stocks were excluded.

However, with the market turning green, penny stocks are once again on the radar of investors. Investors are interested in penny stocks for a variety of reasons. For starters, they have a relatively low market price, allowing investors to purchase a large number of shares. Second, they are capable of providing substantial returns in a short period.

However, investing in penny stocks might be hazardous. They are very volatile and have limited liquidity. Furthermore, little is known about them. This makes analysing them tough. Fundamentally solid penny companies, on the other hand, have the potential for multibagger gains. Indeed, numerous large-cap stocks were previously penny stocks.

Such penny stocks are sought after by both novice and experienced investors.

Best Penny Stocks to Buy Now in 2023

Shree Digvijay Cement is the first on our list, of penny stocks

Shree Digvijay Cement’s share price has increased by more than 200% in the previous 28 months. The share price, which was Rs 20 in March 2020, is currently about Rs 62. The company’s principal businesses are the manufacture and sale of cement. It only has one manufacturing plant with a capacity of 1.2 million metric tonnes (MT). Under the brand name ‘Kamal,’ the firm offers a diverse product line that includes a variety of cement.

It just purchased limestone deposit mines. This will enable the firm to continue manufacturing for the next 20 years. Furthermore, the corporation improved its productivity by modernising its equipment. As a consequence, the firm achieved maximum clinker output and capacity utilisation.

Based on the economic recovery, its sales increased at a compound annual growth rate (CAGR) of 10.3% during the previous three years. However, the increase in sales did not translate into an increase in profit. Due to rising raw material costs, net profit fell by 0.7% during the same time. The company’s shares are now selling at a P/E ratio of 17.9, which is lower than the cement sector average of 20.1.

Singer India comes in second on our list

Singer India’s stock has increased more than 220% since March 2020. The shares, which were for Rs 15 after the market meltdown in 2020, are now worth roughly Rs 52. Its businesses include the manufacture of sewing machines and related equipment.

The firm also deals in household appliances, which has been its key growth category for the previous six years. Singer India distributes its goods under the labels ‘Singer’ and ‘Merritt’. Because it maintains an asset-light approach and outsources the majority of its manufacturing, the firm has only two production units in India.

It does, however, have a large distribution network with over 13,500 contact points to service its clients. It also has a robust after-sales service network. Singer India’s revenue growth has been slow in the previous three years. During the same period, its net profit decreased by 1.4% (CAGR).

The company’s stock is now trading at a P/E ratio of 33.6. This is comparable to the engineering industry average of 33.4. Going forward, the firm intends to capitalise on its solid distribution to boost revenue.

Ador Fontech is next on our list

Ador Fontech’s share price has climbed by more than 180% in the previous two years. Today, the stock that sold at Rs 26 in April 2020 is worth roughly Rs 76. The firm makes industrial components. It also offers services and solutions such as value-added reclamation and spraying.

Furthermore, the organisation attempts to extend the life of industrial components and reduce inventory expenses. Ador Fontech manufactures a wide range of goods, including low-heat input alloys and welding equipment. Its clients come from a variety of industries, including cement, electricity, steel, and defence. Ador Fontech’s revenue has increased at a CAGR of 6% during the previous three years.

Its net profit increased at a strong 34.5% pace (CAGR). The company’s shares are now trading at a P/E of 10.4, which is lower than the electrodes industry average of 22.7. It will spend on research to improve welding procedures in the future. With welding accounting for a major portion of maintenance expenditures, there will be an ideal chance to increase income.

NBCC India comes in fourth place on our ranking

In the previous 28 months, NBCC India’s shares have increased by more than 113%. Its stock, which was worth Rs 15 in March 2020, is now worth roughly Rs 32. It is a Navratna corporation that specialises in project management.

In addition, the corporation is involved in engineering procurement and construction, as well as real estate. Its activities are located in India, the Maldives, Mauritius, and Dubai. NBCC India has also cooperated with a Belarus-based firm to enhance and promote smart cities in India using green construction technologies.

Due to the epidemic, its income has marginally decreased in the previous three years. However, its net profit increased at a robust 34% (CAGR) due to high-margin re-development projects. The company’s shares are presently trading at a P/E ratio of 22.9, which is lower than the construction sector average of 25.7.

In the future, it intends to investigate redevelopment potential in Rajasthan. Although penny stocks might yield high profits, they are extremely hazardous. They can generate both large gains and large losses in a short period. If sufficient due diligence is not performed while choosing these stocks, you risk burning your hands.

As a result, it is critical to examine the fundamentals of such organisations before considering them for investment. Fundamentally sound penny stocks have a track record of high sales and profit growth. They also have little or no debt and a large promoter holding.

Such firms have a significant potential to become future multi-bagger penny stocks. Despite this, you should not devote more than 5-7% of your equity portfolio to penny stocks to guarantee sufficient diversification.