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CNBC-TV18 has analysed over 4,000 small and midcap companies to find some hidden gems. These are companies with low PE, high dividend yield, price to book value of less than 1, positive cash flows, EPS and good profit growth.

All these parameters have been looked at together and some companies have been shortlisted from those 4,000 odd companies. The analysis has excluded export-oriented companies, IT companies, trading companies, investment and holding companies. It is looking at a pure manufacturing play.

One such pick is Alps Industries, which is from the textile sector. The price to earnings of Alps Industries is about 5.5 times currently and the industry PE for that sector is about 18 times. It is a low PE sector, but the segment in which Alps is working in has a PE of about 18 times. The price to book value of this company is about 0.6 times. Analysts said that even if you are buying this company for the book, you are getting it cheaper at this point. The book value per share is around Rs 90 per share and dividend yield is around 1.5%.

For those who believe in the long-term play, dividend yield is one factor. The Sensex has a dividend yield of less than 1%. The stock has an EPS of around 10 and cash EPS of around Rs 13. This is a company from the small and midcap space, but there is huge institutional demand in this segment. Morgan Stanley, SBI, GIC and Bank of New York cumulatively hold over 25%. If you buy on the institutional side, this is a story to look out for.

Sales growth is up about 65% and PAT growth is up about 27%. Its 52-week performance is such that it has underperformed the Sensex by about 70%. The textile sector is a low margin business and the government has started to offer sops like the Technology Upgradation Fund, which is coming up, and rupee appreciation is hurting that sector a bit.

The other hidden gem is from the food-processing sector and the stock is KRBL. Its PE is about 6.4 times and the industry PE is about 20 times. The price to book value is about 0.6 times. The book value per share is about Rs 130 and dividend yield is about 2.3. EPS is about 13.5 and cash EPS is about 23%. There is big institutional activity on this counter. SBI, LIC, Deutsche Bank and Reliance Commodities hold about 18% in this stock. Sales growth is about 26% and PAT growth is about 55% in this company. The food-processing sector is growing, as organized retail come into the foray.

Analysts are of the view that these companies will see some action. Historically, these companies have not seen any momentum. These institutional players look at all these parameters. In the absolute short term, these companies may underperform, but in the long-run there can be outperformance.