The September quarter earnings for most companies in the small & midcap space were better than expected which suggests that recovery is not far away. Investors can use the dips, if any, as recovery plays, Edelweiss Securities said in a report.
This led to an upgrade in earnings of 5–20% for FY22 for nearly 63% of our coverage small and midcaps (SMIDs). Another 10% of SMIDs wallowed in 20%+ earnings upgrades, said the report.
Edelweiss Securities has included more names in its recovery plays list. It has added names like Blue Dart, Bharat Forge, Gujarat Gas, Crisil, Essel Propack, Teamlease, MMFS, LTTS and MindTree to its SMID model portfolio.
Edelweiss has, in fact, divided its SMID model portfolio into three categories - Winners, Warriors & Value. The portfolio has a structural bias towards category leaders (Winners=40–50% weighting) and this has served us well (4% outperformance to SMID indices), it said.
Stocks in the Winner segment include PI Industries, Aarti Industries, Exide Industries, SRF, TeamLease Services, and Gulf Oil.
Stocks in the Warrior segment include Voltas, JK Cement, MindTree, Blue Dart, ACC, Crompton Greaves, and Kajaria Ceramics.
Stocks in the Value Segment include Gujarat Gas, Ajanta Pharma, Quess Corp, and Mahindra Logistics.
(The above report is compiled with inputs from Edelweiss Research & Edelweiss Securities Ltd)
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