Even as we come to the end of 2017 and investors may be on the lookout for top wealth creation opportunity in 2018 and beyond, Edelweiss is betting big on two midcap stocks in the upcoming year. In its latest research report on Edelweiss has identified housing sector as the theme to bet on in 2018. Edelweiss is bullish on companies into home-building materials, as it expects government thrust on affordable housing combined with low interest rates to bode well for the sector. According to the research firm, major growth drivers in the space include India’s low per capita consumption of all home building material products; rising GDP, urbanization, disposable income, nuclear families; shortening renovation cycle due to high real estate cost; and virtually untapped but high potential rural market.
Further, Edelweiss notes that organised players will gain market as GST implementation and revision of rates from 28% to 18% will reduce price differential between organised and unorganised. We take a look a two top midcap stock bets from the space.
Shares of Century Plyboards (India) have more than doubled investor wealth in 2017. Edelweiss is bullish on the shares even in the upcoming year. “The company’s capacity augmentation plan included 12% increase in plywood capacity, 50% in laminate capacity and a new 1,98,000CBM MDF plant (largest in the segment by any player) which is envisaged to drive earnings over FY18-20. Most of this capex has been completed, with the entire exercise envisaged to be over by FY18. With ramp up in utilisation over the next 2 years and no firm capex plans on the horizon, we anticipate huge free cash flow generation,” Edelweiss said in its report. The research firm has a target price of Rs 390 on the shares. Century Plyboards shares closed at Rs 338 on NSE this afternoon. Edelweiss target price implies an upside of more than 15% from the current market prices.
Birla Corporation Ltd
Shares of the Kolkata-based cement manufacturer, Birla Corporation have also done exceedingly well in 2017, returning more than 80% since January. “We estimate BCorp’s revenue to post 19% CAGR over FY17-19E primarily led by higher volume and marginal growth in realisation. We have forecast 42%, 55% and 50% EBITDA, EBIT and PAT growth respectively over FY17-19E. We initiate coverage with ‘BUY’ recommendation and TP of INR 1,300,” the firm said in its report. Birla Corporation shares closed at Rs 1,127 on NSE this afternoon. The firm’s target price implies an upside of more than 15% from the current market prices.