What should investors do with Natural Capsules?

Smallcap companies come with high risk but present investors with unlimited upside potential. 

Growth and profitability are key components in analysing a Smallcap stock, along with industry in which it pertains. One such company that has exhibited strong growth phase along with improvement in financial numbers is Natural Capsules (BSE Code - 524654), and has jumped nearly 10 per cent on Thursday, April 20. 

Company profile 

Natural Capsules is a Rs 450 crore pharmaceutical company that specializes in the manufacturing and distribution of empty hard gelatine capsules, pharmaceutical formulations, and dietary supplements. The company was founded in 1993 and has since grown to become a leading supplier of empty capsules in India and several other countries. The company's product portfolio includes a wide range of capsules, including transparent capsules, coloured capsules, vegetarian capsules, and enteric capsules. 

The company holds strong capex plans and has recently invested in its subsidiary Natural Biogenex having a Rs 115 crore capex. 

Quarterly performance 

In its Q3FY23, the company reported net sales at Rs 45.50 crore, which is nearly 21% YoY rise from the corresponding quarter of the previous financial year. Moreover, net profit jumped 28% YoY to Rs 5.25 crore from Rs 4.10 crore in December 2021. The management expects the robust growth phase to continue with an improvement in margins.

Technical analysis  

Technically, the stock has broken out from its 13-week consolidation phase and trades above all its key moving averages. Interestingly, it has also retraced about 32.80% retracement level from its prior downtrend. Renew buying interest in the stock is evident from above average volumes. The other technical parameters also show strong strength in the momentum. 

In a nutshell, the stock with such strong financial caliber and bullish technical setup is likely to attract investors. Long term investors focusing on growth should keep a track of this stock in upcoming trading sessions.