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Motilal Oswal's Q2 result forecast of midcap companies
Motilal Oswal has come out with a report on the results forecast of midcap companies. Shrinath Mithanthaya, Head of PCG Research, Motilal Oswal Securities explains what he expects from Era Constructions, Apollo Tyres, MRF Tyres and Welspun Gujarat.
Q: You like the tyre space as well, Apollo and MRF are couple of your picks, what are you expecting to see playing out in this particular sector for the quarter?
A: Tyres has perhaps gone through the worst for the last two years. We were in a situation where rubber prices were continuously rising and they were not matched by corresponding product price hikes. Now is the situation where the industry has finally come around with a situation that this cannot go on. They will be in a situation where they will not be in a position to add further capacity. Infact the whole auto industry as a whole could suffer.
Last six months we have seen significant price hikes in the product prices and at the same time with fresh tapping season of rubber coming in, rubber prices are down from an average of about Rs 120-Rs 130 per kilo and now the price stands at Rs 85 per kg. So we expect both volume growth and margins.
Q: Which is the one result that you would be watching out for from the midcap space?
A: We are watching out for a couple of dark horses, one is Welspun Gujarat . Very recently they did a fairly imaginative deal with a company in Russia where they will be sharing 40% of the profits and in turn, they will be putting 150 million pipe mill. Overall, we are positive on the pipe sector as a whole and on Welspun Gujarat. Because of this deal, we expect significant upside in Welspun Gujarat.
Any disclosures
No disclosures except that we are actively covering all the stocks mentioned.
