Five high book value small-cap stocks to watch out in 2025

Elcid Investments' shares saw a mega rally following a special price discovery exercise conducted by the stock exchanges. This exercise brought a company's actual price closer to its book value.

Time and again, value investors attempt to pick stocks trading below the book value per share as they consider these stocks to be undervalued.

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In this article, we will examine some high-book-value small-cap stocks. Investors could add these small caps to their watchlist as they make strong moves in 2025.

Tamilnadu Newsprint & Papers Ltd

The company produces a wide portfolio of high-quality papers for printing and writing and coated and uncoated paperboards best suited for the packaging industry.

It also produces cement and generates power through wind energy for captive use.

TNPL started with the capacity of producing 90,000 tonnes per annum. After continuously multiplying its capacity, today it stands at 440,000 tonnes per annum.

The company is the world's largest bagasse-based paper mill, consuming 1.40 million MT bagasse per year and ranking third in installed capacity and second in printing and writing paper production in the country.

TNPL’s latest book value stands at ₹306.

The current price of ₹171 translates into a price-to-book value (P/BV) multiple of 0.56x. This suggests the stock is traded at a considerable markdown relative to its actual book value.

From a historical perspective, the stock has commanded a median P/BV multiple of 0.8x over the past five years.

On the earnings front, the stock trades at a price-to-earnings (PE) multiple of 11x compared to a median PE of 7.4x.

For FY24, the company reported an 8.2% year-on-year (y-o-y) decline in revenue to ₹4,760 crore. Meanwhile, the net profit declined 46% to ₹210 crore.

TNPL is reportedly planning to expand its business by setting up a new tissue manufacturing unit. The company projects a daily production of 100 tonnes of tissues.

This expansion plan will bring financial benefits and strengthen its position in the market.

In 2024, shares of the company have underperformed big time, falling around 43%.

Vindhya Telelinks Ltd

Part of the M.P. Birla Group, the company is engaged in a wide range of telecom projects. It offers optical fibre cables, an intracity HDD-broadband network, entire infrastructure for setting up telecom companies' towers, EHV cabling, transmission lines, and more.

The company's major clientele includes telecom companies, power companies, businesses engaged in LED lighting, and gas pipelines.

Some of its clients are BSNL, MTNL, Indian Railways, Indian Army, NTPC, SAIL, Bharti Airtel, and Reliance Jio Infocomm.

The company has also ventured into the EPC of water sanitation projects. Last year, it bagged a large order to provide functional household tap connections in allocated households in the state of Uttar Pradesh.

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Vindhya Telelinks’ latest book value stands at ₹3,490.

The current price of ₹1,930 translates into a P/BV multiple of 0.6x. This suggests the stock is traded at a discount to its actual book value.

From a historical perspective, the stock has commanded a median P/BV multiple of 0.5x over the past five years.

On the earnings front, the stock trades at a PE multiple of 10x compared to a median PE of 6x.

Over the years, the company has reported growing revenues year after year, but improving the profitability has remained a challenge.

This could change soon, as there will be a high demand for optic fibre cables due to the faster rollout of 5G and data centres.

The company also has investments worth ₹3,800 crore.

The stock has fallen almost 50% from its peak, while in 2024, it corrected by 15%.

VLS Finance Ltd

Established in 1986, VLS Finance is a multi-faceted, multi-divisional, integrated financial services group.

It provides various services like asset management, strategic private equity investments, arbitrage, and investment banking.

The company is credited as one of the pioneers of private equity (PE) investing in India and has made a series of investments in private and public companies.

VLS Finance’s latest book value stands at ₹609.

The current price of ₹400 translates into a P/BV multiple of 0.67x. This suggests the stock is traded at a discount to its actual book value.

From a historical perspective, the stock has commanded a median P/BV multiple of 0.2x over the past five years.

On the earnings front, the stock trades at a PE multiple of 4.3x compared to a median PE of 4x.

Although the company's financial performance was impacted in FY23, it hoped to improve margins in FY24. As expected, VLS Finance lived up to expectations.

VLS Finance pays consistent dividends and has averaged a dividend yield of over 1% for the last seven years.

The company's promoters continue to remain bullish as they keep buying shares from the open market.

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The company also conducted a share buyback in August 2024, in which it bought back shares worth ₹125 crore.

Apart from this, you could also look at the company from a value-unlocking perspective as it holds around 10% stake in the footwear major Relaxo Footwears Ltd.

In 2024, VLS Finance shares have gained 93%.

Ponni Sugars (Erode) Ltd

Established as Erode Sugar Mills in 1984 and demerged from Ponni Sugars & Chemicals in 2001, Ponni Sugars was set up in 2001.

The company is engaged in sugar manufacturing and is part of the SPB (Seshasayee Paper Board) group.

It also generates power from a cogeneration plant with a total 19 megawatts (MW) capacity.

The group's flagship company— Seshasayee Paper—is a leading integrated pulp and paper manufacturer.

The group also has interests in engineering consultancy, battery manufacturing, and technology research through various other group entities.

Ponni Sugars’ latest book value stands at ₹691.

The current price of ₹409 translates into a P/BV multiple of 0.6x. This suggests the stock is traded at a discount to its actual book value.

From a historical perspective, the stock has commanded a median P/BV multiple of 0.6x over the past five years.

On the earnings front, the stock trades at a PE multiple of 9.1x compared to a median PE of 8x.

Over the years, Ponni Sugar's revenue and profit have grown, driven by improvement in cane crushing and an increase in sales of by-products.

Sugar accounts for the majority of its revenue. Under the sugar business, it manufactures and sells sugar along with by-products, bagasse and molasses.

Ponni Sugars broke records in FY24 following an uptick in volume and improvement of recovery rates.

The sugar industry has made some demands to consider, including higher procurement prices for ethanol, support for sugar cane harvesters, and a long-term sugar import-export and ethanol production policy. This bodes well for the company.

In 2024 so far, shares of the company have remained rangebound.

Coastal Roadways Ltd

The company is engaged in the business of road transportation of goods and logistics services.

It offers all kinds of logistics services. Since cargo handling requires adequate infrastructure facilities to function properly, the company has equipped itself with forklifts, pulleys, truck-mounted cranes, well-secured warehouse facilities, platform loading facilities and communication equipment.

It has a vast fleet of owned and attached vehicles that move consignments across the country. It also has 40+ company-owned branches located at strategic business hubs.

Coastal Roadways' latest book value stands at ₹51.

The current price of ₹40 translates into a P/BV multiple of 0.8x. This suggests the stock is traded at a discount to its actual book value.

From a historical perspective, the stock has commanded a median P/BV multiple of 0.7x over the past five years.

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On the earnings front, the stock trades at a PE multiple of 14.3x compared to a median PE of 18x.

In terms of its financials, the company’s top line and bottom line have remained constant for the past five years.

The company recently declared its Q2 earnings, where profit fell to ₹24 lakh from ₹52 lakh reported in the same quarter last year.

As of September 2024, promoter holding in the company stands at 75%.

In 2024, shares of the company have fallen 10%.

Which other small-cap stocks are trading below book value?

Apart from the above, here are some other small caps that are trading below their book value.

Since you're interested in stocks that trade below their book values, also check out Equitymaster's stock screener, which has separate screens around this.

In conclusion

Investing in small-cap stocks trading below their book value can be appealing.

A high book value suggests that the company's assets are valued favourably compared to its stock price, which might indicate a bargain.

However, you have to be able to separate the men from the boys. There will be numerous beaten-down stocks in the market, where you'd be tempted to invest in the hope of making a quick buck.

So, tread carefully and avoid stocks you are counting on to get lucky. No amount of analysis is going to help you here.

On the other hand, even a little analysis of companies with strong track records and attractive valuations will go a long way in helping you earn market-beating returns.

Also, keep a long-term investing approach in mind. Most investors don't tend to think beyond one to two years. The moment a stock faces a few uncertain quarters, most investors exit the stock.

This is why having a time horizon of at least two to three years helps you look at the stock with a totally different perspective. It will allow you to have a contrarian mindset, which is very important in a field like investing.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com.