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Last Updated : Oct 14, 2018 10:57 AM IST | Source: Moneycontrol.com

2 smallcaps, 1 largecap buy ideas for the medium term

Sumit Bilgaiyan of Equity99 is bullish on these three stocks for the medium term

Moneycontrol Contributor @moneycontrolcom
 
 
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Sumit Bilgaiyan

It was a good day of trade on October 12, following three consecutive Black Fridays in a row. Both the Sensex and the Nifty recovered after a sell-off that lasted five weeks. The mid- and smallcap indices also showed a sharp pullback from their lows.

The US market saw a big sell-off last week, but a strong rupee back home along with falling crude prices supported our markets at lower levels. Benchmark indices posted their biggest single-day gain in over two years on Friday.

Heavyweights such as Zee Entertainment, Tata Consultancy Services and Hindustan Unilever posted strong Q2 numbers. We expecting a strong earning season from corporate India.

India's IIP grew 4.3 percent in August as against 6.6 percent in July, but it was above our expectation. Retail inflation, measured by the Consumer Price Index (CPI), grew 3.77 percent in September from 3.69 percent in August, driven by higher food and fuel prices and a weakening rupee.

Here are top stocks to bet on:

Acknit Industries

The firm is one of the largest manufacturers and exporters of industrial gloves and garments.

Over 90 percent productions are exported to European countries regularly and it is a recognised export house by the government. With a tiny equity of Rs 3.04 crore, it has reserves of above Rs 38 crore. It reported excellent results for Q1 FY19. The profit after tax (PAT) soared by 155% to Rs 1.2 crore on sales of Rs 34.33 crore.

At the current market price, the stock trades at a P/E of just 11.9x on its TTM EPS. It is regularly dividend paying company. Exports constitute 90 percent of its total revenue and hence, AIL will benefit from the depreciating rupee. Stock is trading near three years high. We are recommending a strong buy for medium to long term.

BHEL

BHEL too posted stellar performance in Q1 FY19. Its net profit zoomed by 93% to Rs 156 crore from Rs 81 crore on a YoY basis. This was largely on the back of 8% higher income of Rs 5790 crore. Its order book increased by two and half times to Rs 4,371 crore, compared to Rs 1,744 crore in the corresponding quarter last year.

BHEL had a total order book of Rs 1,17,000 crore by end of Q1 FY19. We are expecting strong performance in Q2 as well. We are recommending a buy in staggered manner for medium to long term.

Andhra Petrochem

The company is the only producer of oxo-alcohols in India. The products are used in PVC industries such as cables, footwear, sheets and films.

The company was established with a capacity to produce 30,000 MTPA of oxo-alcohols at Visakhapatnam, Andhra Pradesh, India. The plant has recently undergone an optimisation and modernisation scheme to increase the capacity to 73,000 MTPA.

The plant employs the latest state of art of technology from M/s Davy Process Technology, London, U.K., with total capital investment of around Rs 497 crore. The company commenced commercial production in February 1994 and after the modernisation on 1st May, 2010.

It is trading below 4 P/BV. It has reported excellent results for Q1FY19. Its sales soared by 44% to Rs 165 crore with a PAT of Rs 46.5 crore. At the current market price (CMP), the stock trades at a P/E of just 13.5x on its TTM EPS of 5.47. It will benefit from the depreciating rupee as it also exports its products.

Disclaimer: The author is Founder of Equity99. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Oct 14, 2018 10:57 am
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