Analyst's Diary: A micro cap with mega potential

Finding a hidden gem in today's frothy market is a Herculean task. But we have unearthed a micro cap with qualities of a large cap! The company in question is Mazda (not to be confused with the Japanese automotive giant), which manufactures vacuum systems, evaporators, and pollution control equipment. Its market cap is a tiny Rs 500 crore, but it can easily pass off as a large business, given its solid cash flows, financials and recurring dividend payouts. It is the only micro cap among 14 businesses that have hiked their dividend each year, without fail, in the last decade. The company has also delivered an impressive revenue and profit after tax growth of 10 and 18 per cent, respectively, between FY19-24. It looks like a solid bet. But here's the puzzling part: the healthy performance doesn't have share price gains to match. The stock has barely moved in the last one year and the current P/E is an inexpensive 20 times. Is the stock just down on luck then? Not really. The low price is due to a number of reasons that make the valuation quite reasonable. We have mentioned the reasons below. But stick till the end to f