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Last Updated : Nov 11, 2018 12:50 PM IST | Source: Moneycontrol.com

Buy these 2 midcaps, 1 smallcaps for the medium term

Nifty has strong support at 10,500-10,460 and resistance at 10,700-10,750 levels, says Sumit Bilgaiyan of Equity99

Moneycontrol Contributor @moneycontrolcom
 
 
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Sumit Bilgaiyan
Equity99

We have seen benchmark indices trading rangebound in the festival week, but midcaps and smallcaps have shown strength during this truncated week. Strong earnings, sharp fall in crude oil prices and appreciation in the rupee are now positive factors for the bulls.

Total equity inflows rose 13 percent over the previous month to Rs 12,622 crore in October. Systematic investment plan (SIP) book touched Rs 8,000 crore this month, which is a positive sign.

This week, the Nifty has strong support at 10,500-10,460 levels and resistance at 10,700-10,750 levels. Our past recommendations -- L&T Finance Holdings, Bharat Electronics, Atul, Amarjothi Spinning Mills, Power Finance Corporation -- have given fantastic returns in the very short term.

Here are the top stock trading ideas that can offer positive returns in the near term:

Jubilant Foodworks:

The company and its subsidiary operates Domino’s Pizza brand with the exclusive rights for India, Nepal, Bangladesh and Sri Lanka. It is market leader in the pizza segment with a network of 1,167 Domino’s Pizza restaurants across 269 cities in India. The company has 32 Dunkin’ Donuts restaurants across 10 cities in India as on September 30, 2018.

It has posted fantastic numbers in Q2FY19 led by higher SSG. Its sales and EBITDA grew by 21.3 percent and 44.3 percent YoY, respectively, while PAT increased by 60.3 percent to 77.7 crore. It reported EBITDA margin to 16.7 percent, an improvement of 268 bps on YoY basis.

Same store sales growth (SSG) for Q1 stood at 20.5 percent. At the CMP, the stock trades at a P/E of 52x on TTM EPS. The stock already corrected 31 percent from recent high. We are recommending a buy in staggered manner for medium to long term.

Rural Electrification Corporation:

REC is a Navratna Central Public Sector Undertaking under the Ministry of Power. Its business activities involve financing projects in the complete power sector value chain, be it generation, transmission or distribution. It provide financial assistance to state electricity boards, state governments, central/state power utiities, independent power producers, rural electric cooperatives and private sector utilities.

The company has reported stable results for Q1FY19. NII declined by 10.5 percent YoY to Rs.2040.8 crore while PAT increased by 36.5 percent to Rs 1468.7 crore as against Rs 1075.96 crore.

At CMP, the stock is trading at P/E of just 4.8x. The company is paying huge dividend every year and dividend yield is above 7.37 percent based on last year’s dividend payout. Its capital adequacy ratio stood at 16.66 percent as on 30th June 2018. We are recommending a buy in staggered manner for medium to long term.

Ruchira Papers:

Ruchira Papers is engaged in the manufacturing of kraft paper and writing & printing paper. The company has 52800 TPA capacity of kraft paper division and 33000 TPA capacity of writing and printing paper division.

It has reported excellent results for Q2FY19. Sales grew by 24.96 percent YoY to Rs 129.99 crore while EBITDA grew by 40.46 percent to Rs.22.54 crore and PAT increased by 29.71 percent to Rs 10.89 crore as against Rs 8.39 crore. EBITDA margin expanded ~191bps YoY to 17.34 percent.

At CMP, the stock is trading at P/E of just 8.75x. The company has successful implementation of modernization programme undertaken during Q4 of FY18 and management are hopeful to get the same reflected in topline and bottom-line of Q2 of FY19 onwards. We are recommending a buy in staggered manner for medium to long term.

The author is Founder of Equity99

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 Nov 11, 2018 12:50 pm
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