5 Mid-Cap Stocks To Buy As Suggested By Axis Securities For Potential Gains Of Up To 46%


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1. Federal Bank: Buy for a target of Rs. 125

For the private sector bank, the brokerage believes that operational improvement is on track. The script’s 42% hike to a target price of Rs. 125 is delivered taking into account positive aspects such as a focus on retail, high commission income, adequate capitalization and careful provisioning. Given the rigorous underwriting standards, changing loan mix and strong retail deposit franchise, we expect the bank’s valuation to improve from current levels if trends in credit quality. assets are maintained and the improvement in ROA is maintained. “We maintain a PURCHASE with a target price of Rs 125 / share (1.3x FY23E ABV)”.

The main risks, however, highlighted for the bank according to the brokerage are a) trends in asset quality over the coming quarters, b) the outlook for loan growth.

Regarding Federal Bank, Axis Securities further states that it is prudently building a loan mix to highly rated corporate and personal loans. The bank’s liability franchise remains strong with CASA plus Retail TD of + 90% and one of the highest LCRs among banks. Restructuring levels are also under control.

2. Dalmia Bharat: Buy for potential earnings of 40%

2. Dalmia Bharat: Buy for potential earnings of 40%

For the large cement entity, Axis has set itself a target of a 40% increase. The company reported encouraging results for the second quarter of fiscal 22 with revenue / volume growth of 7% / 6% year-on-year respectively. He said healthy EBITDA margins of 24% and EBITDA / tonne of Rs 1,218 despite severe headwinds on costs. The brokerage believes the company is well positioned to grow revenues and profitability going forward, supported by a) a recovery in demand for cement in its key markets in both commercial and non-commercial segments, b) measures optimization of costs, and c) increased sales of high-quality cement supported by capacity expansions.

Valuation: The stock is currently trading at 12x FY22E and 10x FY23E EV / EBITDA respectively. We recommend a PURCHASE rating on the company and value the share at 13.5x FY23E EV / EBITDA to arrive at a target price of Rs 2,520 / share, implying upside potential of 35%.

Main risks: a) Fall in cement prices leading to lower realization; b) Further increase in input prices which hampers the margin profile.

3: Buy Varun drinks for a goal of Rs. 1050

3: Buy Varun drinks for a goal of Rs. 1050

Varun Beverages is PepsiCo’s second largest franchisee in the world (outside of the United States). For the consumer staples business, Axis has forecast a target price of Rs. 1,050, which, from current levels, implies a 19% hike.

For the Q3 period of Cy 21, the company has shown healthy growth despite being an off season for it. Growth in healthcare volumes in India as well as international activities primarily fueled the growth.

“With the decline in Covid-19 cases, the likelihood of a normal season in CY22 and the economic reopening leading to out-of-home consumption, we expect the company to gain more ground in the acquired southern territories. and western India. This will contribute to market share gains thanks to the aggressive placement of visi-coolers in these territories and the addition of new distributors as well as the intensification of recent product launches (energy drink) across the territories ”, adds the report.

“We are revising our CY20-23E estimates and now forecast that VBL will record revenue / EBITDA / CAGR PAT of 21% / 27% / 57% respectively. This growth will be driven by 1) Strong execution in underserved South and West territories (penetrating into semi-urban / rural areas with better infra and VC refrigeration locations), 2) Distribution (addition aggressive primary distributor) drove market share gains, 3) Debt reduction, 4) Greenfield Capex and expansion into new international geographies, and 5) Positive cash flow generation. We are increasing our TP to Rs 1,050 / share by valuing it at 18x ​​EV / EBITDA multiple of its CY23 estimate, ”notes the brokerage.

4. Buy Navin Fluorite for a target of Rs. 4100

For the chemicals sector, the brokerage has maintained an industry view of equal weight. The company gives the following justification for a “buy” on the script, including a growing share of high value-added activities, expansion of refrigerant gas activities, a multi-year contract with a large multinational and entry into new markets vertical.

“Given the good visibility on profit growth and other attributes such as healthy order book, the addition of new customers in all segments, the growing contribution of high value-added activities to the margin and a strong product pipeline, growth momentum is expected to continue over the medium term. outlook for NFIL. Given the strong price correction and fair visibility on profits, we maintain our PURCHASE recommendation and raise the TP to Rs 4,100 / share given the fair visibility on profits, ”adds the brokerage. .

5. Buy Ashok Leyland for Rs. 175 target price

5. Buy Ashok Leyland for Rs. 175 target price

According to the brokerage, the utility vehicle company is well positioned to benefit from the economic recovery.

The company is venturing into new African markets other than the Middle East, SAARC, Bangladesh and Sri Lanka markets. In addition, as part of its growing focus on electric vehicles (EVs), the company has created a dedicated EV-only entity called SWITCH Mobility, headquartered in the UK.

“The company continues to focus on reducing its reliance on cyclical truck business by increasing revenue share from export, defense, power solutions, light commercial vehicle operations. and aftermarket spare parts. It remains well positioned to benefit from a strong recovery in the CV cycle following new product launches and a well-diversified product portfolio. We maintain our PURCHASE rating on the stock and value it at 18x ​​FY24E EPS to arrive at a TP of Rs 175, “the report says.

Ashok Leyland – a flagship company of the Hinduja Group, is India’s third largest commercial vehicle manufacturer. The company’s key products include buses, trucks, engines, defense vehicles and special vehicles.

So here are all of the best mid-cap space picks listed by the brokerage:

Mid-cap stocks Sector Current price Target price Upside down
Federal Bank Banking 88 125 42.00%
Dalmia Bharat Materials 1796 2520 40.31%
Varun drinks Basic consumer products 881 1050 19.00%
Fluor Navin Materials 3760 4100 9.00%
Ashok Leyland Industrial 120 175 46.00%
Disclaimer:

Disclaimer:

The ideas for actions mentioned above are taken from the Axis Securities report. Investing in stocks is risky and investors are advised to be cautious. Please note that neither Greynium Information Technologies Pvt Ltd nor the author is responsible for any losses caused as a result of decisions based on the article.

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