5 Penny Stocks to Watch out for in 2023, When you buy penny stocks, the most important thing to know is whether or not it is fundamentally strong.
You want to see a company that has been around for a while and has a history of earnings growth, as well as decent profit margins.
Along with solid growth, you also need to see if the company is debt free or has manageable debt on its balance sheet.
Ideally, this strong company will be undervalued relative to its balance sheet. What this means is that the stock price usually hasn’t increased as much as it should have because investors haven’t realised its potential yet.
That’s why it’s a great opportunity to make gains greater than the broader market in the long term.
Regardless of whether you are new to the stock markets and want to start investing, or an experienced investor who wants to diversify into some other form of investments, penny stocks can be a great choice.
Today, we look at five penny stocks, well-positioned to offer growth in the long run. This penny stocks list for 2023 has companies which have shown consistency in revenues, profitability, dividend payout, and have manageable debt.
1 Transformers and Rectifiers India (TRIL)
Incorporated in 1994, Transformers & Rectifiers has consolidated its position in the Indian transformer industry as a manufacturer of a wide range of transformers, which conform to the quality expectations of both the domestic and international market.
The company is present in wide ranges spanning power transformers, distribution transformers, furnace transformers, rectifier transformers, and shunt reactors. These have applications in power transmission and distribution, among other industrial sectors.
The company has three plants in the city of Ahmedabad.
TRIL’s revenue saw a sharp rise in 2022 led by an increase in both realisation and volumes. This resulted in its profit almost doubling to Rs 139.9 million in the said year.
As of March 2022, the company has a debt to equity ratio of 0.91x. It has kept debt manageable over the years despite operating in a working capital-intensive industry.
As far as dividends are concerned, the company did not pay dividend between 2015-2020. But it was back to rewarding shareholders in 2021 and 2022 with dividend payout of 18.8% and 14.2%, respectively.
| Rs m, consolidated | FY18 | FY19 | FY20 | FY21 | FY22 |
|---|---|---|---|---|---|
| Revenue | 7,157 | 8,554 | 7,010 | 7,421 | 11,583 |
| Growth (%) | -13% | 20% | -18% | 6% | 56% |
| Operating profit | 713 | 731 | 672 | 781 | 839 |
| OPM (%) | 10% | 9% | 10% | 11% | 7% |
| Net profit | 54 | 45 | 4 | 71 | 140 |
| NPM (%) | 1% | 1% | 0% | 1% | 1% |
| Total Debt | 3,994 | 2,633 | 3,081 | 2,631 | 3,233 |
| Debt to Equity (x) | 1.21 | 0.78 | 0.92 | 0.77 | 0.91 |
| Dividend Payout (%) | 0 | 0 | 0 | 18.8 | 14.2 |
| ROE (%) | 2.0 | 1.5 | 0.3 | 2.3 | 4.1 |
With the recent order, the company’s order book as on 18 October 2022 stands at Rs 15.2 bn, which should offer revenue visibility for 2023 at least.
2 Jagran Prakashan
Jagran Prakashan (JPL) is India’s leading media and communications group with its interests spanning across print, outdoor advertising, FM, activations, digital segment, etc. It’s one of the largest media conglomerates in the country.
It’s newspaper operations alone with 9 newspaper titles in 5 different languages, sweeping across 15 states with over 100 editions include some veritable titles as the world’s largest read daily.
The company dominates the radio business with 39 radio channels, under the established Radio City brand.
2021 was a tough year for Jagran as demand for advertisements among other things were dampened. No one was willing to touch the sector with a ten-foot pole.
But the sector recovered in the next one year and Jagran too bounced back in style. Join Our Telegram Channel
However, inflation and record high newsprint costs continue to impact the company’s profitability.
As of March 2022, Jagran has a debt to equity ratio of 0.13x. It has had zero or minimum debt over the past six years.
As far as dividends are concerned, Jagran Prakashan did no pay dividends in 2020 and 2021 as it was recovering from pandemic. The record prior to that is sweet with dividend yields between 1.5% and 4%, for more than a decade.
For 2022, Jagran has already declared a dividend of Rs 4 per share which results in a yield of almost 6%.
| Rs m, consolidated | FY18 | FY19 | FY20 | FY21 | FY22 |
|---|---|---|---|---|---|
| Revenue | 23,040 | 23,627 | 20,973 | 12,892 | 16,160 |
| Growth (%) | 1% | 3% | -11% | -39% | 25% |
| Operating profit | 6,298 | 5,745 | 4,649 | 2,798 | 4,264 |
| OPM (%) | 27% | 24% | 22% | 22% | 26% |
| Net profit | 3,110 | 2,742 | 2,809 | 783 | 2,169 |
| NPM (%) | 13% | 12% | 13% | 6% | 13% |
| Total Debt | 1,478 | 4,064 | 2,252 | 2,683 | 2,770 |
| Debt to Equity (x) | 0.07 | 0.22 | 0.12 | 0.13 | 0.13 |
| Dividend Payout (%) | 30.0 | 37.8 | 0.0 | 0.0 | 0.0 |
| ROE (%) | 14.8 | 14.0 | 14.8 | 4.0 | 10.5 |
The buyback price is set at Rs 75 per share.
3 Ircon International
Ircon International is an Indian public sector construction company with specialisation in execution of railway projects on turnkey basis and otherwise.
After commencing business as a railway construction company, it diversified to roads, buildings, electrical substation and distribution, airport construction, commercial complexes, and metro rail works.
The company caters to both domestic and international markets.
2022 marked the best ever year for Ircon in terms of revenue which increased 38%.
The ongoing year will be even better as the company has reported good quarterly results so far. For the most recent September 2022 quarter, Ircon’s net sales grew 50% while net profit surged 35%.
After marking its territory in the construction space, the company is now entering into engineering, procurement, and construction contracts in railways segment.
The effect of this is already visible in Ircon’s share price in recent months.
As far as debt is concerned, Ircon has a debt to equity ratio of 0.30x as of March 2022. Over the years, it has maintained its leverage and had zero debt in most years. Join Our Instagram Channel
Ircon’s dividend history is also quite sweet with yields ranging between 4-6% for the past 4 years. It has paid dividends since 1998.
| Rs m, consolidated | FY18 | FY19 | FY20 | FY21 | FY22 |
|---|---|---|---|---|---|
| Revenue | 40,242 | 47,984 | 53,911 | 53,498 | 73,797 |
| Growth (%) | 31% | 19% | 12% | -1% | 38% |
| Operating profit | 6,318 | 10,766 | 10,929 | 9,031 | 9,730 |
| OPM (%) | 16% | 22% | 20% | 17% | 13% |
| Net profit | 4,087 | 4,501 | 4,853 | 3,911 | 5,923 |
| NPM (%) | 10% | 9% | 9% | 7% | 8% |
| Total Debt | 32,000 | 30,765 | – | 3,309 | 13,990 |
| Debt to Equity (x) | 0.85 | 0.78 | 0.0 | 0.08 | 0.3 |
| Dividend Payout (%) | 47.1 | 45.0 | 46.0 | 36.1 | 39.7 |
| ROE (%) | 10.7 | 11.1 | 11.2 | 8.4 | 11.7 |
4 Gujarat Industries Power
Gujarat Industries Power was incorporated in 1985. The company has been promoted by leading Gujarat PSUs, namely Gujarat State Fertilizers (GSFC), Gujarat Alkalies and Chemicals (GACL), and Gujarat Urja Vikas (GUVNL).
The company is engaged in the business of electrical power generation with an installed generation capacity of 1,184.4 MW as of June 2022. It has a diversified portfolio of Thermal (Gas and Lignite), Wind, and Solar Power assets in the state of Gujarat.
In 2021, the company’s topline and bottomline was impacted as some of its gas-based power plants remained non-operational.
Skip forward to 2022 and Gujarat Industries saw improvement in its renewable power plants and lignite division.
Historically, the company has had minimal debt on its book. As of March 2022, the debt to equity ratio was at a respectable 0.17x.
As far as dividends are concerned, Gujarat Industries has declared dividends since 1997. In its entire history, dividend yields have hardly slipped below 2%.
| Year End | Dividend % | Dividend Yield % | Dividend per Share (Rs) |
|---|---|---|---|
| 31-Mar-2022 | 25.00 | 3.41 | 2.50 |
| 31-Mar-2021 | 27.00 | 3.57 | 2.70 |
| 31-Mar-2020 | 29.00 | 5.79 | 2.90 |
| 31-Mar-2019 | 29.00 | 4.07 | 2.90 |
| 31-Mar-2018 | 27.00 | 2.78 | 2.70 |
| 31-Mar-2017 | 27.00 | 2.61 | 2.70 |
| 31-Mar-2016 | 27.00 | 3.35 | 2.70 |
| 31-Mar-2015 | 25.00 | 2.94 | 2.50 |
| 31-Mar-2014 | 25.00 | 3.80 | 2.50 |
| 31-Mar-2013 | 25.00 | 3.37 | 2.50 |
| 31-Mar-2012 | 25.00 | 3.75 | 2.50 |
| 31-Mar-2011 | 25.00 | 2.70 | 2.50 |
| 31-Mar-2010 | 25.00 | 2.07 | 2.50 |
| 31-Mar-2009 | 22.00 | 4.71 | 2.20 |
Once the capex is completed, the company would double its operational capacity and majority of it would be renewable capacity.
| Rs m, consolidated | FY18 | FY19 | FY20 | FY21 | FY22 |
|---|---|---|---|---|---|
| Revenue | 13,538 | 14,074 | 13,788 | 13,353 | 11,724 |
| Growth (%) | 3% | 4% | -2% | -3% | -12% |
| Operating profit | 5,320 | 6,651 | 5,469 | 4,546 | 4,270 |
| OPM (%) | 39% | 47% | 40% | 34% | 36% |
| Net profit | 2,445 | 1,764 | 2,480 | 1,798 | 1,713 |
| NPM (%) | 18% | 13% | 18% | 13% | 15% |
| Total Debt | 6,166 | 5,728 | 4,473 | 4,749 | 5,193 |
| Debt to Equity (x) | 0.25 | 0.22 | 0.16 | 0.17 | 0.17 |
| Dividend Payout (%) | 16.7 | 24.9 | 17.7 | 22.7 | 22.1 |
| ROE (%) | 10.4 | 7.0 | 9.3 | 6.4 | 5.8 |
5 National Aluminium (NALCO)
National Aluminium (NALCO) is a Navratna CPSE under Ministry of Mines. The company has integrated and diversified operations in mining, metal, and power segments.
NALCO is the first PSU in India to venture into international market in a big way with London Metal Exchange (LME) registration since May 1989.
As one of the largest integrated primary producers of aluminium in Asia, NALCO’s presence encompasses the entire value chain – bauxite mining, alumina refining, aluminium smelting, power generation, and downstream products.
2022 marked the best ever year for the Odisha-based company. In FY22, NALCO registered the highest-ever revenues of Rs 141.8 bn and a record profit of Rs 29.5 bn.
The company’s growth trajectory came to a halt recently where its Q2 results showed decline in margins and profitability. This was due to higher raw material costs which rose as much as 80% from last year.
NALCO is a debt free penny stock. It has had zero or minimal debt on its book over the years.
On the dividend front, NALCO has a long history of rewarding shareholders, having declared dividends since 1995.
It has maintained consistency of having yields above 5% for consecutive years. The dividend yield for NALCO has not dropped below 1% since 2011.
| Rs m, consolidated | FY18 | FY19 | FY20 | FY21 | FY22 |
|---|---|---|---|---|---|
| Revenue | 95,095 | 114,993 | 84,718 | 89,558 | 141,808 |
| Growth (%) | 26% | 21% | -26% | 6% | 58% |
| Operating profit | 16,971 | 32,184 | 7,618 | 19,294 | 48,146 |
| OPM (%) | 18% | 28% | 9% | 22% | 34% |
| Net profit | 13,422 | 17,337 | 1,362 | 12,994 | 29,514 |
| NPM (%) | 14% | 15% | 2% | 15% | 21% |
| Total Debt | 450 | 668 | 123 | 461 | 207 |
| Debt to Equity (x) | 0.0 | 0.01 | 0.0 | 0.0 | 0.0 |
| Dividend Payout (%) | 82.1 | 61.9 | 376.6 | 49.5 | 40.5 |
| ROE (%) | 13.0 | 16.5 | 1.4 | 12.6 | 25.4 |
Aluminium prices have also remained extremely volatile, due to geopolitical issues the world has been dealing with.