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Last Updated : Dec 28, 2016 02:30 PM IST | Source: CNBC-TV18

Edelweiss Broking's top midcap picks for 2017

In an interview to CNBC-TV18, Sandeep Raina, Assistant Vice President at Edelweiss Broking shared his top midcap picks for 2017.


In an interview to CNBC-TV18, Sandeep Raina, Assistant Vice President at Edelweiss Broking shared his top midcap picks for 2017.


Below is the verbatim transcript of Sandeep Raina's interview with Ekta Batra & Surabhi Upadhyay.


Ekta: Your views on Sudarshan Chemical Industries. Why you like that stock and what might your target price be?


A: Sudarshan Chemical Industries is into pigment. They are one of the leading players in pigments in India, growing close to 15-18 percent and we believe the growth rate will be continued. However, on profit after tax (PAT) front they will be even higher because margins will improve. We believe that they will grow at 20-21 percent on the PAT front. 


We like this stock because the marketcap is close to Rs 1900 crore odd and they are talking about a capex of Rs 1000 crore for next five years, which will be very good for the company because the scale will increase significantly, one. Second, at the valuation front, the price has fallen to 40 percent odd from Rs 450 levels to currently at Rs 280 levels and we are getting this stock at 14 PE which is very good for a company growing at 20 percent and maintaining return on capital employed (RoCe) and numbers.

Surabhi: You have a couple of consumer related plays as well as part of the picks - Crompton Greaves Consumer Electrical and Indian Terrain Fashions - both caught my eye because  there is a lot of noise in the market about demonetisation, immediate disruption, what happens to discretionary spending in next couple of quarters. How does that tie in with your picks?

A: I think demonetisation in short-term is negative but I don't think the impact will be that harsh because the stocks have fallen 40-40 percent and there is an impact of 15-20 percent on the demand for this quarter and for next quarter it can be another 10 or 12 percent, but that will not take away all the numbers for FY18. So when you buy a stock you will look for one-two years, if you are talking fundamentally and be it for Crompton Greaves Consumer Electrical which was at Rs 190 and from Rs 190 you are looking at Rs 140 price and similarly for Indian Terrain Rs 180 price has come down to Rs 140 levels. So the froth is over and that is what I can say and these stocks are available at 15 times for Indian Terrain. However, Crompton Greaves Consumer Electrical, which is at 23 times, which optically looks expensive but a company growing at 20 percent and RoCe greater than 50 percent for Crompton Greaves Consumer. These valuations are good to buy these companies for long-term.

First Published on Dec 28, 2016 02:05 pm
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