Looking for midcap stocks? Axis suggests these 4 for August

Lupin: The brokerage has a buy call on the stock with a target price of ₹1,082, indicating an upside potential of 10 percent. According to Axis,  it is confident in Lupin’s business due to the launch of these 2 new products where it has a first-mover advantage. It believes both these products would increase the company’s gross margins by 100 bps in the next two years. Moreover, further developments in the business could add value in the business such as new launches in the US market and double-digit growth in the India business. However, Lupin’s margins at 13% are still below the industry levels of 22%, it said, therefore, it foresees a significant scope for margin improvement in the upcoming quarters. Axis expects the macro environment to be in favour of the industry, led by a fall in raw material prices along with low logistics and fuel costs.

Federal Bank: Axis Securities sees Federal Bank rising 18 percent to ₹160 in the next 12 months. The lender's key strengths continue to be i) Sustained credit growth, ii) Strong liability franchise, iii) Improving fee income with the bank looking to deepen the relationship with corporates to improve client wallet share, iv) Improving Cost Ratios, and v) Benign credit costs backed by robust asset quality metrics, noted the brokerage. FB is well-placed to deliver healthy business growth over the medium term and Axis expects it to deliver an RoA/RoE of 1.3%/15-16% over FY24-25E on easing margin pressures and healthy asset quality.

Ashok Leyland: The brokerage is bullish on the stock with a target price of ₹210, implying an upside potential of 14 percent. Axis stated that AL remains well-positioned to benefit from a longish CV upcycle. It remains positive on the long-term growth trajectory of the company with better margins led by operational efficiencies, material cost reduction program, softening of commodity costs, and pricing discipline, and expects 8% CAGR volume growth over FY23-26E; We forecast the company to post Revenue/ EBITDA/PAT growth of 11%/22%/34% CAGR over FY23-26E. 

Relaxo Footwears: The brokerage has a buy call on the stock with a target price of ₹1,050, indicating an upside potential of 11%. According to Axis, the Q1FY24 result was strong and the management’s FY24 outlook gives us confidence that the worst is behind the company as – a) Demand environment is likely to recover in FY24, especially in rural India, 2) Raw material prices are now stable, which will aid in gross margins expansion, 3) The company is regaining its lost market share from unorganised players, 4) It is focusing on premiumisation by increasing the share of a fast-growing sports and athleisure category, and 5) The company is doubling its capacity of Sparx from the current 50,000 pairs/day to 100,000 pairs/day at Bhiwadi (Rajasthan), which it believes is a step in the right direction from the long-term perspective.