India is currently on the cusp of a 3- 5 bull run, believes Prabhudas Lilladher’s managing director Dilip Bhat.
Speaking on the sidelines of the Small and Midcap Conference, Bhat says the brokerage firm believes in quality and hence has invested into stocks that may be relatively overpriced.
Below are the top midcap picks as selected by Bhat and Rahul Jain, senior vice president & head- Sales, Institutional Equities:
Britannia: Bhat says the kind of sustainable growth that Britannia has been showing and the kind of return on equities (RoEs) and the kind of free cash that the company has been throwing, it is small wonder that this company continues to get the premium valuation.
He adds that over next couple of years the company’s growth is expected to continue and also expects the free cash generation to continue. So, it is expensive but quality always is a little more expensive then the rest of the pack. So, in that sense Britannia still continues to be one of our favourite stocks.
Federal Bank: Jain believes going ahead Federal Bank typically will perform quite well on the asset quality and expects the bank’s asset quality to improve further.
“Hopefully they are planning to go more aggressive. In terms of valuation also I would feel Federal Bank is a much better placed bank with strong corporate governance, management bandwidth being quite strong; we feel Federal Bank could do well,” adds Jain.
The brokerage is also bullish on the home finance segment stocks like Can Fin Homes
JK Lakshmi: Bhat says JK Lakshmi is another company where despite the fact that the stock price has gone up so much we still have enough value still on the plate. The EBITDA per tonne for the next two years is going to show a reasonably very good improvement. Even at the current levels EV/tonne is still very reasonable."I think that is a management where there was some apprehension but they have demonstrated that they can deliver in terms of the performance and which is what we are backing for this stock," he adds.
Midcap capital stocks like KPIT Technologies and Ashoka Buildcon; Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and Shriram Transport are some more of Lilladher’s favorite picks.
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