Looking for midcaps? MOSL lists 6 stock picks for May

Ashok Leyland: The brokerage has a target of ₹175 for the auto stock, indicating an upside of 21 percent. As per MOSL, AL is on strong footing (lean cost structure & reasonable debt) and is the best play on CV cycle revival, along with market share recovery & expansion of revenue/ profit pools. It expects a 61% PAT CAGR for the firm over FY23E–25E. For Ashok Leyland, the focus will remain on gaining deeper penetration and growth in better margin products, noted MOSL. It further added that the order pipeline is robust for the EV segment and that the stable demand environment and improving pricing power should boost earnings.

Vedant Fashions: MOSL sees the fashion stock rising 17 percent to ₹1,435. According to the brokerage, strong margins, healthy return profile and franchisee-led expansion model ensure robust cash generation and limited pressure on the balance sheet. It forecasts revenue/EBITDA CAGRs of 20%/21% over FY23-25 on the back of 15% growth in footprint addition and SSSG (same-store sales growth) of 5%. Vedant Fashions, with a Pan India presence, has established itself as a strong brand within the underpenetrated ethnic-wear segment (20% of the total market was branded as of FY20), said MOSL. Further, expanding a) Twamev through up-selling and b) Manthan to capture the value fashion segment could underpin revenue growth moving ahead, it added.

Metro Brands: MOSL has a target price of ₹1,045 for the retail stock, implying an upside of 13 percent. Metro’s superlative store economics, healthy portfolio of products and strong balance sheet/FCF productivity warrant a rich valuation, stated the brokerage. It expects a revenue/PAT CAGR of 23%/21% over FY23-25. Metro continued to witness healthy growth and, therefore, unlike its peers, Metro did not prepone EOSS (end-of-season sale). Growth could be attributed to a strong wedding/festive season, easing inflation pressure lately, a shift from unorganized to organized and growing middle-class earnings, said the brokerage.

M&M Financial Services: The brokerage has a target of ₹320 for the NBFC stock, indicating an 11.5 percent upside. Given its long lineage, strong parentage, and a great liability franchise, MMFS has navigated the stress emanating from the pandemic reasonably well, and is well-positioned to deliver on its articulated targets, said MOSL. It expects AUM/ PAT CAGR of 20%/19% over FY23-FY25E. With process enhancements across sourcing, underwriting and collections, MOSL now expects the asset quality improvement to sustain and now models lower credit costs of 1.7%/1.9% in FY24/FY25. 

APL Apollo Tubes: MOSL sees the stock rising 22 percent to ₹1,450. As per the brokerage, the addition of high-margin products from the Raipur unit and a growing share of value-added products are likely to result in margin improvement. It estimates a revenue/EBITDA/PAT CAGR of 17%/24%/31%, respectively, over FY22-25, as the company is expected to maintain its growth trajectory on a strong demand outlook. MOSL further added that APL Apollo has also continuously gained market share in the industry and is currently the market leader in the Indian Structural tubes with a market share of 55% in FY22 v/s 27% in FY17

Godrej Properties: The brokerage has a target of ₹1,575 for the realty firm, indicating an upside of 19 percent. On a pre-Covid equity base, the company is not far from its 20% RoE target. GPL has done strong business development in FY23 and if these projects are launched on a timely basis, its RoE profile will improve notably as these projects hit P&L in 3-4 years, noted the brokerage. It further noted that GPL exited FY23 with the highest ever bookings of ₹12,200 crore and believes demand traction will continue aided by favorable affordability.