The pandemic-hit year 2020 is going to end on a positive note for the market benchmarks - Sensex and Nifty - and analysts and brokerages are upbeat about the prospects of the market in the coming year.
While some brokerages are as bullish as to think Sensex may hit 50,000 markets in the coming year, they expect mid and smallcaps also to perform better than the year 2020.
As of December 28 close, the BSE Sensex was up about 15 percent while the BSE Midcap index has gained 19 percent and the Smallcap index 31 percent in the calendar year 2020.
Mid and smallcaps are yet to touch their 2018 peaks, so there is some steam left in them, analysts say.
Ashutosh Tiwari, Head of Research, Equirus Securities, said considering the gains in large-caps and as of mid and small-caps are still below their 2018 peaks, the market rally will broaden and therefore mid and small-cap should be the theme to play over the next one year.
While the undertone is bullish for the mid and small-cap space, analysts advise being stock-specific to reap maximum gains.
Here are 12 mid and small-cap stocks suggested by the various experts that can give decent return returns over the next one-year timeframe.
Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities
CESC | Buy | LTP: Rs 605 | Target price: Rs 800
There is stability in the regulated business and reducing losses from distribution circles. Its two subsidiaries - Dhariwal & Haldia have reported improvement in performance.
Dhariwal has tied up 270 MW under a long-term power purchase agreement. The distribution circles in Rajasthan have also reported significant improvement from losses.
The analyst expects earnings to grow by 16 percent in FY22E and 7.7 percent in FY23E. The standalone business enjoys a very high predictability of cash flows and profitability (more than 20 percent return of equity).
High operating cash flows leads to healthy free cash flow generation.
Castrol India | Buy | LTP: Rs 122 | Target price: Rs 165
Castrol’s Q3CY20 results were well above our estimates driven by a better-than-anticipated rebound in lubricant volumes and lower RM costs.
The management remained optimistic on volumes sustaining closer to normalcy, although gains on RM cost may reverse.
The analyst expects a healthy recovery in volumes and margins in CY2021-22. Castrol’s valuation multiple has adequately de-rated to price in long-term risks from the adoption of EVs in India.
PNC Infratech | Buy | LTP: Rs 172.15 | Target price: Rs 210
The management is positive on the pick-up in execution and has upgraded FY21 revenue guidance (to Flattish/minor growth vs 10 percent YoY decline guided earlier.
PNC has recently announced two new projects related to irrigation and water supply of value Rs 1,291 crore which strengthens its total order book to Rs 15,800 crore, which is 3.2 times FY20 revenue.
The order book gives strong revenue growth visibility for the next two to three years. The management targets to add about Rs 9,000-10,000 crore (vs earlier guidance of Rs 7,000 crore) of order inflows in FY21 of which it has already secured about Rs 4,200 crore of work till Oct’20 while the balance is expected in H2FY21.
The company is largely focusing on projects from the water and roads sector.
Analyst: Ashis Biswas, Head of Technical Research, CapitalVia Global Research
Glenmark Pharmaceuticals | Buy | LTP: Rs 498.45 | Target price: Rs 890 | Stop loss: Rs 320
This stock is trading above its important averages and has formed a consolidation pattern on its monthly charts.
It has an interim resistance around the Rs 570 – 575 zone. Any breakout above the level of Rs 575 would add momentum to the stock.
This stock is indicating a reversal in trend on its monthly charts and trading above its important moving averages.
It has an interim resistance placed at 193. Any breakout above this level is expected to add momentum to the stock.
Endurance Technologies | Buy | LTP: Rs 1,260.70 | Target price: Rs 1,650 | Stop loss: Rs 850
The momentum in auto sales has significantly improved auto parts sourcing and has benefited auto ancillary companies.
This stock has gained around 115 percent since its March lows after the resumption of economic activities.
Its outlook seems optimistic. It has given a consolidation level breakout on its monthly charts.
Any breakout above the level of Rs 1,240 would further strengthen the stock.
Analyst: Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers
Ajanta Pharma | Buy | LTP: Rs 1,690 | Target price: Rs 1,980
Earnings are likely to be driven by its branded generics in India, the Rest of Asia and Africa, on improving prospects.
Besides, it plans to file 10-12 products in the US in FY22.
The analyst believes the stock is available at attractive valuations of 19.3 times/16.3 times FY22e/23e earnings.
Ajanta plans to reduce its exposure to third-party products from 60-70 percent of domestic sales to 15-20 percent in FY22.
Greater utilisation at new plants will help it absorb a sizeable part of operational cost.
With no plans to add workforce or capacity in the near term, the analyst expects margins of 32 percent over FY21-23. The new plants’ tax exemptions may reduce the tax rate to 24 percent by FY23.
Polycab India | Buy | LTP: Rs 1,054 | Target price: Rs 1,228
Faster traction in the high margin B2C segments (wires/FMEG) and exports, premiumisation and cost-saving measures led to Polycab’s strong Q2 performance.
Controlled WC and a healthy net-cash position (about Rs 630 crore) were other positives. On the faster recovery, the analyst expects 8 percent/13 percent CAGRs in revenue/PAT over FY20-22 with an over 14 percent EBITDA margin.
Strategic moves (inventory reduction, channel financing, etc) will aid in long-term sustainable growth.
Focus on working capital management (inventory reduction, channel financing) and optimizing costs are a few strategic moves to keep Polycab on the sustainable growth path in the long run.
Rs 200 crore CAPEX in building capacities and technology upgrading, even in a tough FY21, is a testimonial to this.
Coromandel International | Buy | LTP: Rs 853 | Target price: Rs 1,012
The crop protection business grew by 35 percent versus last year for the first half and 26 percent for the quarter, the company further strengthened its new product launches and strategic tie-up with the global players and co-marketing initiatives.
It continues to invest in R&D, product development and regulatory filing and has a very rich product pipeline and tends to introduce new molecules in the coming quarters.
The company generated an operating cash flow of Rs 2,083 crore in H1FY21. It plans to expand its Kakinada and Vizag plants from internal accruals and will incur a Capex of up to Rs 500 crore.
Analyst: Ashutosh Tiwari, Head of Research – Equirus Securities
Aditya Birla Fashion and Retail | Buy | LTP: Rs 163.60 | Target price: Rs 191
Faster than expected recovery seen with a robust uptick in festive sales. Expect complete normalization of demand by Mar’20.
Significant cost control exhibited in various fields like rent, employee costs & other expenses has led to a saving of about Rs 870 crore in H1FY21E.
Funds raise of Rs 2500 crore (Rs 1000 crore of rights issue + Rs 1500 crore from Flipkart deal) provides the much-needed comfort on the debt-laden balance sheet & provides ammunition to pursue aggressive growth plans from FY22E.
FIEM Industries | Buy | LTP: Rs 523.80 | Target price: Rs 1,124
During FY20 while two-wheeler industry volumes declined 18 percent YoY, FIEM sales decline was just 5 percent.
Even during Q2FY21 while volumes of key customers HMSI and TVS declined, FIEM sales grew 1 percent YoY.
Market share gains and transition to LEDs from halogen helping the company in the domestic market.
Supplies started to 4 programs of Yamaha Japan and Italy, 2 more to start in 2HFY21.
Supplies for some of the models of Suzuki Japan will also begin by Q4FY21. Delivered highest ever quarterly EBITDA during Q2 even adjusted for lower employee costs.
Net cash company with strong FCFF expected over the next 3 years.
HG Infra | LTP: RS 215 | Target price: Rs 305
Management is targeting order inflows of Rs 3500-4000 crore, which in our view will be a key monitorable.
Recently HGIL has won one Railway segment project worth about Rs 700 crore from IRCON.
Debt continues to hover at Rs 350-Rs 380 crore, largely on account of receivables stuck in the Rajasthan road project.
Debt is expected to come down gradually in H2 as the majority of the works will be completed by FY21-end.
NHAI’s awarding activity is likely to resume by Jan’21 and Delhi & Haryana form about 21 percent of the bid pipeline where HGIL is strong and has a good strike rate.
Additionally, Ganga Expressway in UP is likely to come for bidding in Feb-March and is about Rs 22,000 crore+ EPC opportunity which HGIL is eyeing actively which together would likely re-rate the stock.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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