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Last Updated : Apr 13, 2020 03:03 PM IST | Source: Moneycontrol.com

Analysts suggest these 15 quality mid-caps for 1-year investment horizon

Due to the COVID-19 pandemic, most large and mid-cap stocks have corrected significantly. They are expected to remain volatile unless the issue of coronavirus comes under control.

 
 
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At this juncture, when the market looks to be in a shamble and investor sentiment is fragile, most brokerages and analysts recommend going for quality large and mid-caps.

Due to the COVID-19 pandemic, most large and mid-cap stocks have corrected significantly. They are expected to remain volatile unless the issue of coronavirus comes under control.

"We believe that in the near-term market, mid-cap stocks would remain volatile but for the long term, all mid-cap quality stocks will outperform. Hence we believe that investors should keep accumulating in every level of correction," said Amarjeet Maurya, AVP Research, Angel Broking.

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Analysts advise that one should look at stocks that are less likely to be impacted by COVID-19.

"We have to turn cautious and invest higher mix towards staples, FMCG and domestic-oriented companies with strong leadership that are not likely to be impacted by the coronavirus problem in the long-term," said Vinod Nair, Head of Research at Geojit Financial Services.

Based on the recommendations of some analysts, here are 15 mid-cap stocks that you may consider for a one-year horizon. Take a look:

Analyst: Vinod Nair, Head of Research at Geojit Financial Services

Jubilant Foodworks | Buy | LTP: Rs 1,421.20 | Target price: Rs 1,674 | Upside: 18%

Jubilant Foodworks is a leading quick-service restaurant company with strong revenue growth of 27 percent CAGR for the last 9 years.

In the current scenario, with earnings impact already factored in the price, the valuation looks very attractive. Jubilant has a free cash flow of Rs 244 crore as of FY19.

"With no leverage and adequate cash balance of Rs 596 crore, Jubilant is well placed to meet its operational challenges. We maintain buy rating on the stock with a target price of Rs 1,674 based on 45 times FY21E adjusted EPS," said the analyst.

Escorts | Buy | LTP: Rs 690.40 | Target price: Rs 820 | Upside: 19%

Escorts is the third-largest agricultural tractor manufacturer in India having strong presence in north India.

The near-term headwinds is unlikely to impact Indian farmers flow of activities while strong Rabi season and 1.7 lakh crore interim stimulus package for farmers will signal positive for the company.

The joint venture with KUBOTA, a global leader in tractor, will lead to higher global footprint .

"Given the company’s growth outlook and strong balance sheet we value Escorts at 19 times FY21 EPS and recommend buy with a target of Rs 820," said the analyst.

Mahanagar Gas | Buy | LTP: Rs 901 | Target price: Rs 1,083 | Upside: 20%

Mahanagar Gas is Mumbai's sole distributor of gas, an essential commodity, the demand for which will not be impacted much by the present COVID-19 scenario.

The recent decline in natural gas prices will lower costs and expand margins going forward. The demand for gas is set to pick up drastically in the country, with the government encouraging the use of clean fuels and reduce pollution levels in the country.

Bharat Electronics | Buy | LTP: Rs 70.15 | Target price: Rs 90 | Upside: 28%

Bharat Electronics is well-positioned to benefit from rising defence expenditure, given its technological superiority (in-house R&D spend nearly 10 percent of revenues) and strong execution capabilities and GoI focus on indigenous procurement.

COVID is not going to impact defense spending, while strong execution and dividend yield of 5.4 percent makes it attractive.

Current order backlog is at Rs 54,959 crore (4.5 times FY19 sales), provides strong earning visibility for the next 3 years.

Currently the stock is trading at 1 year forward at P/E of 8 times which 38 percent discount of historical average of 13 times.

"Given strong balance sheet, RoE nearly 20 percent and strong earnings visibility, we have a buy rating with a target price of Rs 90," said the analyst.

Analyst: Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities

Manappuram Finance | Buy | LTP: Rs 111.30 | Target price: Rs 140 | Stop loss: Rs 90 | Upside: 26%

The stock has corrected to the levels of the year 2016-2018. It has formed multiple bottom around Rs 78 and Rs 80 during the same period before heading for the dream run to Rs 194 levels.

Technically, such type of support zones acts as reversal points in the catastrophic falls. The analyst advises buying 50 percent at the current levels and the remaining 50 percent at Rs 95.

Info Edge (India) | Buy | LTP: Rs 2,230 | Target price: Rs 2,800 | Stop loss: Rs 1,900 | Upside: 26%

It has fallen to Rs 1,580 during the recent fall, which is exactly 50 percent retracement of the rally started from the lows of the year 2008.

Technically, it’s a properly corrected stock from recent highs. The analyst advises buying 50 percent at the current levels and the remaining 50 percent at Rs 2,000.

SRF | Buy | LTP: Rs 3,250.05 | Target price: Rs 3,800 | Stop loss: Rs 2,450 | Upside: 17%

The year 2019 was one of the most successful years for SRF as it gained almost 144 percent during the year 2019. It was at Rs 1,535 in the month of January 2019 and closed at Rs 3,450 in the month of December 2019.

The level of Rs 2,500 acted as strong support in times of crisis. In the recent fall, it has fallen to the same buying support zone.

The analyst advises buying 50 percent at the current levels of Rs 3,000 and remaining 50 percent at Rs 2,600.

Torrent Pharma | Buy | LTP: Rs 2,543 | Target price: Rs 3,400 | Stop loss: Rs 2,000 | Upside: 34%

Since the beginning of the year 2020, the stock has appreciated by 36 percent, which is unusual but at the same time, it shows that the company has attracted fresh flows and should do well in the long run.

Those who have missed the boat may enter at every major support, said the analyst who advises buying 50 percent at the current levels of Rs 2,550 and remaining 50 percent at Rs 2,200.

Analyst: Amarjeet Maurya, AVP Research, Angel Broking

Bata India | Buy | LTP: Rs 1,238 | Target price: Rs 1,434 | Upside: 16%

The analyst expects Bata India to report net revenue CAGR of nearly 11 percent to about Rs 3,974 crore over FY2019-22E, mainly due to increasing brand consciousness among Indian consumers, new product launches, higher number of store additions in tier-II and tier-III cities and focus on high growth women’s segment.

"Further, on the bottom-line front, we expect CAGR of nearly 20 percent to Rs 562 crore over the same period on the back of margin improvement (increasing premium product sales)," said the analyst.

Avenue Supermarts | Buy | LTP: Rs 2,392.65 | Target price: 2,520 | Upside: 5%

Avenue Supermarts owns and operates the supermarket chain D-MART. Focused on value retailing, it offers a wide range of fast-moving consumer (food and non-food) products, general merchandise and apparel.

The analyst expects D-MART to report consolidated revenue and PAT CAGR of 18 percent and 26 percent, respectively, over FY2019-22E.

Hawkins Cooker | Buy | LTP: Rs 4155.10 | Target price: Rs 4,536 | Upside: 9%

"We forecast Hawkins to report healthy top-line CAGR of nearly 11 percent to Rs 892 crore over FY19-22E on the back of government initiatives, new product launches, strong brand name and wide distribution network," said the analyst.

On the bottom-line front (reported PAT), the analyst estimates about 21 percent CAGR to Rs 96 crore due to strong revenue and operating margin improvement (on the back of correction in raw material prices).

Analyst: Narendra Solanki, Head - Equity Research ( Fundamental), Anand Rathi Shares and Stock Brokers

Aarti Industries | Buy | LTP: Rs 911.30 | Target price: Rs 1,200 | Upside: 32%

Aarti Industries is a leading Indian manufacturer of Speciality Chemicals and Pharmaceuticals with a global footprint. Chemicals manufactured by Aarti are used in the downstream manufacture of pharmaceuticals, agrochemicals, polymers, additives, surfactants, pigments, dyes, etc.

On the back of the coming NCB, APIs and intermediate capacities along with revenue from many-year deals from Q4 FY20, the analyst expects revenue and PAT to clock growth in higher teens over FY20-22.

"The coming capex, commencement of many-year deals and greater share of high-margin products are expected to drive future revenue and profit. At the current price the company is trading at attractive valuations," said the analyst.

Tata Consumer Products | Buy | LTP: 309.05 | Target price: 473 | Upside: 53%

With a presence in more than 40 countries, Tata Consumer houses a strong portfolio of brands including Tata Tea, Tetley, Vitax, Eight O’Clock Coffee and Himalayan water. It aims to boost coffee business with its JV with Starbucks. In the last couple of years, in order to improve effectiveness, unlock synergies, optimize costs and streamline operations, the company exited some of its loss-making businesses and restructured its international operations.

Simplifying the business structure with the focus on core businesses should drive growth in the long-term.

In May 2019, Tata Chemicals Ltd. (TCL) announced transaction to merge the Consumer Businesses of TCL with the company. The move comes in line with its strategy to expand portfolio of fast growing FMCG sector in India and abroad.

The merger is expected to result in revenue and cost synergies including from supply chain opportunities and operational improvements. During the announcement, management noted that it expects the merger to result in pre-tax synergies of 2-3 percent of the company’s India branded business revenues over the next 18-24 months.

Nippon Life India Asset Management | Buy | LTP: Rs 287 | Target price: Rs 485 | Upside: 69%

Nippon Life India Asset Management is the fifth largest AMC in India. The total AUM of the company in mutual funds is nearly 2 lakh Cr which is about 8.4 percent of the entire market as of FY19.

Besides the mutual fund business, the company has a sizeable AUM under Portfolio Management services and alternate Investment funds. The company also manages funds for provident fund bodies and the government managed pension funds schemes.

The company has a very strong distribution network which includes nearly 75,000 distributors and 74 banks. This strong network has given the company access to about 47 lakh unique customers.

The strategy of the company is to focus on leadership in the retail segment which forms 40 percent of AUM. This helps the company to reduce its dependency on HNI investments which are cyclical in nature.

The company which has grown at a CAGR of 15 percent over the past 5 years, has decent growth potential. NAM India has a very strong and a growing SIP book of over Rs 10,000 crore per year which helps to provide predictable flows. Additionally, product innovation and strong distribution network should continue to drive growth.

Dr. Lal Pathlabs | Buy | LTP: Rs 1,475.45 | Target price: Rs 1,999 | Upside: 35%

The company has very strong and continuously improving financials with its Revenue, EBITDA & PAT growth at a CAGR of 16 percent, 18 percent, 20 percent respectively over the past 5 years. The company has a very healthy balance sheet and has maintained very high return ratios. Recently, Indian Council of Medical Research (ICMR), has empanelled the company’s National Reference Lab at Rohini, New Delhi for Covid 19 testing.

With rising penetration of healthcare services and medical insurance, rising disposal income, the industry is structurally well positioned for long term growth.

The industry is expected to grow at a CAGR of 13-15 percent for the next 5 years according to WHO data .

This under penetration and growth prospects puts large chain’s like DLPL in a very sweet spot to register exponential growth in future.

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.
First Published on Apr 13, 2020 02:07 pm
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