Top 8 midcap stocks which have eroded 50% of investors’ wealth in 2013
The BSE Midcap Index has plunged a little over 14 per cent so far in the year 2013, while some midcap stocks have eroded investors' wealth by more than 50 per cent.
The BSE Midcap index has seen selling pressure led by both domestic and global factors.
Overall, benchmark indices have also come off highs registered in the month of February after an uninspiringUnion Budget, European crisis, political jitters and hawkish stance by the Reserve Bank of India failed to lift investor sentiment.
Massive selling in large midcap stocks has largely been on the back of margin calls triggered at various domestic brokerages. Some midcaps have corrected up to 50 per cent so far in the year.
So does that give an opportunity to investors to start accumulating these beaten down quality midcap stocks?
According to analysts, investors can look at buying quality midcap names which have corrected sharply in recent weeks. Hawkish stance by the RBI and political uncertainty are another couple of factors which made investors jittery.
"The hawkish stance that I saw in RBI policy coupled with political instability weighed on markets. Maybe the index overall has dipped only 3% or 4%, but a lot of midcaps have corrected by 30% to 50% in the last one week or so," says Nitin Jain, Edelweiss Financial ServicesBSE 0.17 % in an interview with ET Now.
"I am a little worried right now from the market point of view and hence would not want to take too many long positions on equity, but it also provides you great opportunities if you are a long-term investor in certain stocks like media, and some stocks in infra, may be L&T," he added.
The recent carnage in the midcap space has unnerved investors and left them confused about current stock price levels - will they slide further?
Analysts also warn investors to approach with caution stocks which are highly leveraged. Most of the stocks that have corrected recently had pledged shares concerns, they point out.
"The current market situation warrants that leverage companies be completely ignored irrespective of balance sheet side valuation. On the midcap side, City Union BankBSE 2.11 % and ING VysyaBSE -0.53 % look good. In consumer stables, Emami, Glaxo Consumer Healthcare, PidiliteBSE -2.18 % look good," said Manish Sonthalia, VP & Fund Manager, Motilal OswalBSE -4.75 % Asset Management said in an interview with ET Now.
"In case of pharma, we like IPCABSE -0.77 % quite a bit. Even WockhardtBSE 0.72 % is quite decent in terms of earnings growth. These are some of the names that we are concentrating on and we have them in our portfolio," he added.
The BSE Midcap index was a market outperformer in the year 2012 with gains of over 38 per cent. However, for the year 2013 the index has corrected over 14 per cent as on March 22.
Correction in some midcap stocks may have been warranted for various reasons such as corporate governanceissues, pledged shares, deteriorating business conditions, unsustainable leverage etc.
"However, the contagion, we believe, could have possibly spread to less susceptible candidates, thus making them value picks," ICICIBSE -1.50 % Securities said in a report.
ICICI Securities recommends Apollo TyresBSE 0.36 %, McLeod RusselBSE 1.23 %, Indrapastha Gas, J&K Bank, Bajaj FinanceBSE -3.52 % and Torrent Pharma in the midcap universe.
We have collated top five midcap ideas from brokerage firm Dolat Capital:
Kajaria Ceramics: Buy with a target price of Rs 272
Dolat Capital remains structurally positive on Kajaria CeramicsBSE 2.55 % even though Q3FY13 results were a bit muted. The brokerage firm is of the view that the below potential growth could continue for the March quarter as well.
However, despite the short term pressures like slowing consumption and increased gas prices, they believe that the long term structural story remains intact. Further, the JV outsourcing theme continues with the acquisition of Cosa Ceramics in the previous quarter.
Dolat expects the top line and bottom line to grow at aCAGR of 17.5% & 27.8% respectively over FY13-15 while the ROE is expected to remain strong at 31 per cent. It also expects the debt equity to go down from 0.7x in FY13E to 0.4x in FY14E and further to 0.2x in FY15E.
Supreme Industries Ltd: Buy with a target price of Rs 409
The company offers the widest and most comprehensive range of plastic products including piping systems, packaging solutions like cross laminated films, protective packaging products and flexible films, plastic parts & accessories for consumer durables & automobiles.
The brokerage expects the volume growth to remain strong over the next two years (led by strong growth in Pipes & SILPAULIN), exhibiting a CAGR of 15 per cent for FY13-FY15E.
SIL will be incurring a capex of Rs 10 billion from FY13-FY17E buoyed by strong demand across its product portfolio. The capex would be funded through internal accruals and monetization of its commercial property "Supreme Chambers".
The brokerage firm expects SIL to report revenue & PAT CAGR of 17.2% & 21% over the period from FY13-15. SIL currently trades at 12.5x & 10.3x its FY14E & FY15E consolidated earnings (excluding construction business).
Astral Poly Technik: Buy with a target price of Rs 472
APTL's product range is witnessing strong growth due to product characteristics, which makes the product superior to competitors' products. APTL has license for 4 products from Lubrizol which puts APTL at an advantage.
APTL is also aggressively expanding its dealer network to increase its presence across the country. The brand enhancement program would improve the product perception by new users.
The continuous capacity addition at low incremental cost would enable APTL to cater the strong growth rate as well as improve the return ratios. Considering the growth trajectory and ability to protect return ratios (ROE @ 27%), the brokerage firm maintains a structurally positive stance.
Lupin Ltd: Accumulate with a target price of Rs 656
LupinBSE 0.21 % continues on the top of Dolat's preferred plays in Indian pharma. It anticipates limited competition in generic launches in US (gTricor.gYasmin & OC's) to aid growth trajectory. The brokerage firm expect the US segment to contribute USD 681mn to consolidated revenues during the current fiscal.
Our FY14 estimates factor in contribution from OC launches (31 filings so far) and Tricor generic (limited competition) at USD 85mn & USD 65mn respectively to US sales, it said. Overall, Dolat anticipates 18 per cent earnings growth over FY13-15E and return ratios of over 25 per cent.
Petronet LNG: Accumulate with a target price of Rs 180
Key beneficiary of latent demand for RLNG reflected in the share of LNG increasing significantly in the basket from 1 per cent in FY04 to 20 per cent in FY12.
LNG has been a better solution for India as compared to transnational pipelines due to geographical concerns and having a shorter gestation period. Capacity expansion will be a key driver of revenue growth. Liquefaction capacity expected to be doubled in next 4 years.
Given the business model, PLL does not carry the risk of rupee depreciation or gas price as both the re-gasification margin and the off-take of re-gasified gas is fixed for confirmed off-take volumes.
(The views and recommendations expressed in this section are the analysts' own and do not represent those of EconomicTimes.com)
Source : ECONOMICTIMES.COM
The BSE Midcap Index has plunged a little over 14 per cent so far in the year 2013, while some midcap stocks have eroded investors’ wealth by more than 50 per cent.
The BSE Midcap Index has plunged a little over 14 per cent so far in the year 2013, while some midcap stocks have eroded investors' wealth by more than 50 per cent.
The BSE Midcap index has seen selling pressure led by both domestic and global factors.
Overall, benchmark indices have also come off highs registered in the month of February after an uninspiringUnion Budget, European crisis, political jitters and hawkish stance by the Reserve Bank of India failed to lift investor sentiment.
Massive selling in large midcap stocks has largely been on the back of margin calls triggered at various domestic brokerages. Some midcaps have corrected up to 50 per cent so far in the year.
So does that give an opportunity to investors to start accumulating these beaten down quality midcap stocks?
According to analysts, investors can look at buying quality midcap names which have corrected sharply in recent weeks. Hawkish stance by the RBI and political uncertainty are another couple of factors which made investors jittery.
"The hawkish stance that I saw in RBI policy coupled with political instability weighed on markets. Maybe the index overall has dipped only 3% or 4%, but a lot of midcaps have corrected by 30% to 50% in the last one week or so," says Nitin Jain, Edelweiss Financial ServicesBSE 0.17 % in an interview with ET Now.
"I am a little worried right now from the market point of view and hence would not want to take too many long positions on equity, but it also provides you great opportunities if you are a long-term investor in certain stocks like media, and some stocks in infra, may be L&T," he added.
The recent carnage in the midcap space has unnerved investors and left them confused about current stock price levels - will they slide further?
Analysts also warn investors to approach with caution stocks which are highly leveraged. Most of the stocks that have corrected recently had pledged shares concerns, they point out.
"The current market situation warrants that leverage companies be completely ignored irrespective of balance sheet side valuation. On the midcap side, City Union BankBSE 2.11 % and ING VysyaBSE -0.53 % look good. In consumer stables, Emami, Glaxo Consumer Healthcare, PidiliteBSE -2.18 % look good," said Manish Sonthalia, VP & Fund Manager, Motilal OswalBSE -4.75 % Asset Management said in an interview with ET Now.
"In case of pharma, we like IPCABSE -0.77 % quite a bit. Even WockhardtBSE 0.72 % is quite decent in terms of earnings growth. These are some of the names that we are concentrating on and we have them in our portfolio," he added.
The BSE Midcap index was a market outperformer in the year 2012 with gains of over 38 per cent. However, for the year 2013 the index has corrected over 14 per cent as on March 22.
Correction in some midcap stocks may have been warranted for various reasons such as corporate governanceissues, pledged shares, deteriorating business conditions, unsustainable leverage etc.
"However, the contagion, we believe, could have possibly spread to less susceptible candidates, thus making them value picks," ICICIBSE -1.50 % Securities said in a report.
ICICI Securities recommends Apollo TyresBSE 0.36 %, McLeod RusselBSE 1.23 %, Indrapastha Gas, J&K Bank, Bajaj FinanceBSE -3.52 % and Torrent Pharma in the midcap universe.
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We have collated top five midcap ideas from brokerage firm Dolat Capital:
Kajaria Ceramics: Buy with a target price of Rs 272
Dolat Capital remains structurally positive on Kajaria CeramicsBSE 2.55 % even though Q3FY13 results were a bit muted. The brokerage firm is of the view that the below potential growth could continue for the March quarter as well.
However, despite the short term pressures like slowing consumption and increased gas prices, they believe that the long term structural story remains intact. Further, the JV outsourcing theme continues with the acquisition of Cosa Ceramics in the previous quarter.
Dolat expects the top line and bottom line to grow at aCAGR of 17.5% & 27.8% respectively over FY13-15 while the ROE is expected to remain strong at 31 per cent. It also expects the debt equity to go down from 0.7x in FY13E to 0.4x in FY14E and further to 0.2x in FY15E.
Supreme Industries Ltd: Buy with a target price of Rs 409
The company offers the widest and most comprehensive range of plastic products including piping systems, packaging solutions like cross laminated films, protective packaging products and flexible films, plastic parts & accessories for consumer durables & automobiles.
The brokerage expects the volume growth to remain strong over the next two years (led by strong growth in Pipes & SILPAULIN), exhibiting a CAGR of 15 per cent for FY13-FY15E.
SIL will be incurring a capex of Rs 10 billion from FY13-FY17E buoyed by strong demand across its product portfolio. The capex would be funded through internal accruals and monetization of its commercial property "Supreme Chambers".
The brokerage firm expects SIL to report revenue & PAT CAGR of 17.2% & 21% over the period from FY13-15. SIL currently trades at 12.5x & 10.3x its FY14E & FY15E consolidated earnings (excluding construction business).
Astral Poly Technik: Buy with a target price of Rs 472
APTL's product range is witnessing strong growth due to product characteristics, which makes the product superior to competitors' products. APTL has license for 4 products from Lubrizol which puts APTL at an advantage.
APTL is also aggressively expanding its dealer network to increase its presence across the country. The brand enhancement program would improve the product perception by new users.
The continuous capacity addition at low incremental cost would enable APTL to cater the strong growth rate as well as improve the return ratios. Considering the growth trajectory and ability to protect return ratios (ROE @ 27%), the brokerage firm maintains a structurally positive stance.
Lupin Ltd: Accumulate with a target price of Rs 656
LupinBSE 0.21 % continues on the top of Dolat's preferred plays in Indian pharma. It anticipates limited competition in generic launches in US (gTricor.gYasmin & OC's) to aid growth trajectory. The brokerage firm expect the US segment to contribute USD 681mn to consolidated revenues during the current fiscal.
Our FY14 estimates factor in contribution from OC launches (31 filings so far) and Tricor generic (limited competition) at USD 85mn & USD 65mn respectively to US sales, it said. Overall, Dolat anticipates 18 per cent earnings growth over FY13-15E and return ratios of over 25 per cent.
Petronet LNG: Accumulate with a target price of Rs 180
Key beneficiary of latent demand for RLNG reflected in the share of LNG increasing significantly in the basket from 1 per cent in FY04 to 20 per cent in FY12.
LNG has been a better solution for India as compared to transnational pipelines due to geographical concerns and having a shorter gestation period. Capacity expansion will be a key driver of revenue growth. Liquefaction capacity expected to be doubled in next 4 years.
Given the business model, PLL does not carry the risk of rupee depreciation or gas price as both the re-gasification margin and the off-take of re-gasified gas is fixed for confirmed off-take volumes.
(The views and recommendations expressed in this section are the analysts' own and do not represent those of EconomicTimes.com)
Source : ECONOMICTIMES.COM
