A bearish trend was prominent in Indian equity markets in the past few days as fear gripped investors due to hardening bond yields and geopolitical tensions between Hamas and Israel. Though the market saw a recovery on October 27, experts feel it may continue to be on tenterhooks. But can investors profit from this market?
Moneycontrol brings you a special series featuring stocks that could offer good entry points in this ongoing market correction.
Here, Gaurang Shah, Senior Vice-President at Geojit Financial Services, shared top bets from the midcap sector. Shah sees 15 percent upside potential in all these names in the span of 18-20 months thanks to their strong outlook for future growth.
#1 Indian Hotels | CMP: Rs 376
Rationale: The Tata Group hotel company is touted to be the best player in the hospitality segment. It started FY24 on a good note with revenue growing in double digits. In September 2023, IHCL clocked its best business as rooms were sold out owing to the G20 summit. Going ahead, the upcoming wedding and holiday season will keep room demand high, further improve occupancy ratios and keep revenue per average room at high levels.
The change in consumer travelling habits, improvement in business travel and recovery in foreign tourist arrivals too will keep IHCL on a strong footing, further bolstering revenue and profitability. As the stock has slipped 8 percent in just five trading sessions, we believe it is a lucrative addition to anyone’s portfolio.
Valuation-wise, the company trades cheaper at 51 times (x) its price-earning (PE) multiple compared to peers like Lemon Tree Hotels that trades at 71x PE.
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#2 Ashok Leyland | CMP: Rs 166
Rationale: The auto major is a pure play in the commercial vehicle (CV) segment. The company has a strong presence in the truck segment, with a market share of 29 percent as of FY22. It has also been gaining market share in the light commercial vehicle (LCV) segment with its modular platform strategy, which has improved supply chain management to reduce the cost of the vehicle. The company boasts of a strong product pipeline in its EV or electric vehicle segment as well as LCVs.
In addition, the company has charted its plan to outperform the market by increasing its market share in weak territories (North and East markets), expanding its dealer network and launching new products frequently.
The stock has crashed 16 percent from its 52-week highs of Rs 191 and this makes it a solid portfolio addition.
#3 KPIT Technology | CMP: Rs 1,120
Rationale: Unlike other IT companies, KPIT Tech’s essence is embedded in the fact that it supplies software services to automotive companies. Almost all of its revenue comes from the automotive business. So, we believe the potential for scalability is huge given that automotive manufacturers are heavily investing in newer technologies.
With the stock declining over 10 percent in just 10 days, we expect it to be a major wealth booster in the long term as it is touted to be a formidable player in the future mobility segment.
The Pune-based company caters to markets in Europe, US, Japan and China, apart from India. The company’s has outperformed other midcap technology stocks like Coforge and L&T Technology in the last six months.
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#4 Cyient | CMP: Rs 1,604
Rationale: We believe that the company has all the potential to become the next large-cap stock. The company focuses on engineering, manufacturing, data analytics, networks and operations. While the majority of IT companies have reported a weak September quarter, Cyient has consistently delivered good numbers. In Q2, the topline grew 27 percent on-year, whereas profit jumped by 127 percent on-year.
Valuation-wise, the stock is trading cheaply at 25x PE multiple as against peers like Coforge trading at 41x PE multiple.
With the stock crashing 22 percent from its 52-week high, it is a good opportunity to enter.
#5 KEC International | CMP: Rs 637
Rationale: The stock is a diversified capital goods engineering company that caters to the Indian Railways in a big way. The company has power infrastructure development in over 48 countries including Africa, Central Asia, Middle East, South Asia and Southeast Asia. While power transmission is the largest business vertical, the company also has a growing presence across power systems, cables, railways, telecom and water. Thus, we believe that given strong power demand momentum, all business verticals of KEC International stand to benefit.
The company has an order flow guidance of Rs 25,000 crore in FY24 (up 11 percent on-year), out of which order inflow has already surpassed over Rs 7,500 crore so far this year.
This healthy order book, therefore, provides better revenue visibility in the coming quarters, making it a worthy addition to your portfolio.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions
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