Investors that are on the lookout for some exposure to the small side of the market, might want to take a look at GenusPlus Group Ltd (ASX: GNP).
That's the view of analysts at Bell Potter, which think it could be a small cap ASX stock to buy right now.
What is GenusPlus?
GenusPlus is a specialist power and communications infrastructure and services provider operating across Australia. It designs, builds and maintains electrical transmission and distribution networks, substations, and battery systems.
Last month, it released its FY 2024 results and reported record revenue of $551 million (up 24.1%) and record net profit after tax of $19.3 million (up 43.7%).
Bell Potter believes that this strong form could continue for the foreseeable future. Particularly given its robust short to medium term outlook. It explains:
Recent contract wins for the delivery of maintenance and upgrade works at transmission and distribution networks across Australia should support further recurring deliverables in addition to long-term / panel workflow. Revenue from recurring works has grown at a CAGR of 50% p.a. between FY20-24. Solar and wind project delivery, with increasing BESS integration, represents a significant opportunity for GNP in addition to several greenfield large-scale transmission developments scheduled to be built over the next 3-5 years.
The broker expects this to lead to sales of $645 million in FY 2025, $719 million in FY 2026, and then $815 million in FY 2027.
And with its margins expected to improve in the coming years, the broker has pencilled in net profit after tax of $26 million in FY 2025, $30 million in FY 2026, and then $35 million in FY 2027.
Market-beating returns
Bell Potter believes the small cap ASX stock could generate market-beating returns for investors picking them up at current levels.
According to the note, the broker has put a buy rating and $2.70 price target on its shares. This implies potential upside of 15% for investors over the next 12 months.
In addition, a modest 1.3% dividend yield is expected, lifting the total potential return beyond 16%.
Overall, Bell Potter continues to see GenusPlus as key small cap pick and thinks it would be a great option thanks to its exposure to a number of key tailwinds. It concludes:
We continue to see GNP as a key small-cap investment opportunity to play the theme of increasing investment in renewable energy, battery energy storage and transmission infrastructure across Australia. We see GNP's valuation multiples as undemanding considering our EPS CAGR expectation of 20% p.a. over FY24-27.
