Midcap stocks have been a mixed bag so far this year. Since the beginning of 2016, the BSE Midcap index plunged over 8 per cent till March 15, whereas BSE Sensex plunged 6 per cent during the same period.
In the midcap space, Torrent Power, Vakrangee, Finolex Industries and Manappuram Finance gained 35.07 per cent, 25.79 per cent, 23.01 per cent and 17.46 per cent, respectively, so far in the calendar year 2016.
On the other hand, shares of Risa International were among top losers with a fall of 76.78 per cent on a year-to-date basis till March 15. Other losers include Mangalam Industrial Finance (59.97 per cent), Jaiprakash Associates (38.49 per cent) and Amtek Auto (38.22 per cent).
Ravi Shenoy, VP-midcaps research, Motilal Oswal Securities, said, “Valuations of midcap stocks are looking comfortable after the recent correction.”
The BSE Midcap index closed 0.41 per cent down at 10,179.85 on March 16, whereas the BSE Sensex gained 0.53 per cent.
Below are five midcap investment options on which market experts are looking positive:
Blue Star
Recommended By: Angel Broking
Market Price (as on March 15): Rs 345.15
Investment Rationale: Blue Star is one of the largest air-conditioning companies in India. With a mere 3 per cent penetration level of ACs vs 25 per cent in China, the overall outlook for the room air-conditioner (RAC) market in India is favourable. Aided by increasing contribution from the Cooling Product Division, Angel Broking expects the overall top-line to post a revenue CAGR of 11.2 per cent over FY2015-18E and margins from 5.3 per cent in FY2015 to 7.1 per cent in FY2018E. Moreover, the proposed merger with Blue Star Infotech will provide cash influx and strengthen the balance sheet. The brokerage house has ‘Buy’ rating on Blue Star with a target price of Rs 439.
Navkar Corporation
Recommended By: Angel Broking
Market Price (as on March 15): Rs 163.50
Investment Rationale: Navkar is one of the three CFS (container freight stations) at Jawaharlal Nehru Port Trust (JNPT) with rail connectivity, helping it garner market share at the port. The company is in an expansion mode increasing capacity by 234 per cent to 1,036,889 TEUS (Twenty-foot Equivalent Units) at JNPT and coming up with an inland container depot (ICD) at Vapi (with Logistics Park).
According to Angel Broking, the ICD with rail link should benefit from first mover advantage in a region that has huge market potential and accounts for nearly 27% of volumes at JNPT. The ICD should be able to capture the EXIM volumes from the region through rail link that till now was being custom cleared at JNPT (Import) or being transported via road and consolidated at JNPT (Export). South Gujarat volumes will now head straight to Vapi ICD; thus the company can now cater to bulk commodities and domestic traffic that it had been rejecting owing to capacity constraints at CFS. The brokerage house expects NCL to successfully use its rail advantage and scale up its utilisations at both JNPT and Vapi ICD. It has ‘Buy’ rating on NCL shares with a target price of Rs 265.
Manappuram Finance
Recommended By: KR Choksey Shares and Securities
Market Price (as on March 15): Rs 34.65
Investment Rationale: Catering to short-term needs of the informal credit market, Manappuram Finance is the second largest non-banking finance company in India. According to KR Choksey Shares and Securities, While the worst is behind for Manappuram Finance, the recalibration of gold loan portfolio and widening of the product base should help in driving the value growth. Moreover, robust capital base at healthy 25.6 per cent and relatively lower leverage at 3.3x provides substantial headroom to boost future growth and enhance return ratios. Moreover, the consistent dividend payout records is an icing on the cake. The brokerage house initiated coverage of Manappuram Finance with a ‘Buy’ recommendation and a target price of Rs 52.
Gateway Distriparks
Recommended By: JM Financial
Market Price (as on March 15): Rs 254.40
Investment Rationale: The share price of Gateway Distriparks slid 40 per cent in the past one year till March 15, 2016. For the quarter ended December 2015, the company reported a consolidated net profit of Rs 30.93 crore, down 43.08 per cent, against Rs 54.35 crore in the corresponding quarter a year ago.
JM Financial initiated coverage on Gateway Distriparks with ‘Buy’ rating with March 2017 target price of Rs 340. The brokerage house believes the recent drop in share price adequately captures the weakness in macro environment and earnings momentum. Gateway Distriparks is well placed to benefit over the long term from pick-up in domestic growth.
Just Dial
Recommended By: Nomura
Market Price (as on March 15): Rs 658.25
Shares of the local search engine provider Just Dial surged over 40 per cent in the past one month till March 15. On March 16, the scrip was trading 1.24 per cent down at Rs 650.10 in the noon trade. For the financial year ended March 2015, the company reported net profit of Rs 138.89 crore, up 15.16 per cent against Rs 120.61 crore last year. Gross sales of the company grew 27.86 per cent on year-on-year basis.
Japanese brokerage house Nomura also has ‘Buy’ rating on Just Dial shares with target price of Rs 970. Nomura thinks India’s ecommerce industry has the potential to grow nearly 4 times by 2019, led primarily by increasing internet penetration (driven by smartphones), under-penetration of digital media, the large untapped market and improving macroeconomic fundamentals.
