Analysts remain bullish on these five mid and small-cap stocks that rallied up to 150% in a year

Mid- and small-cap stocks have emerged as shining stars in the market, defying the challenges posed by volatile conditions over the last one-year. During this period, shares of South Indian Bank, Wonderla Holidays, Tata Communications, DCB Bank, and Federal Bank, have rewarded their shareholders with spectacular returns, delivering up to 154%.

However, analysts believe that the upward trajectory of these stocks is poised to continue, driven by factors such as strong business fundamentals, promising growth prospects, and attractive valuations.

South Indian Bank

Shares of South Indian Bank have delivered a whopping return of 154% over the last one year. During this period, the bank's shares have appreciated from ₹8 apiece to ₹21.70. With consistent gains in nine out of the last twelve months, the shares have displayed a positive trend.

In terms of yearly performance, the shares gained 112.43% in CY22, marking a complete turnaround as they experienced a continued downward trend from CY18 to CY21, losing almost 71% of their value. In CY23 so far, the shares have soared by 16%.

Further, the shares still have ample room to appreciate going forward, as per the brokerage firm ICICI Direct. In its latest research note, the brokerage has pointed out that the bank has undergone an impressive business transformation since October 20 under the leadership of incumbent MD & CEO, Mr Murali Ramakrishnan.

In the last 2.5 years, the bank churned 58% of book with strong quality, an improvement of 500 bps in CASA to 33% and a decline in GNPA from 5.9% to 5.1%, while PCR rose from 58.7% to 76.8%, the brokerage underscored.

With business transformation imbibed in the business process, transition in leadership is expected to remain smooth with continued traction in growth and profitability, it said.

The brokerage assigned a 'buy' rating to the South Indian bank with a target price of ₹23 apiece amid anticipation of continued gradual improvement in RoA & healthy business growth.

Wonderla Holidays

The company shares have delivered a staggering performance over the last one year, jumping from ₹229 to ₹574.55, producing a return of 150%. The shares have been on a winning streak since the beginning of CY23, ending the previous six months in green and also marking a new lifetime high of 587.90 apiece.

However, based on recent estimates by the brokerage firm Sharekhan, the stock still can grow further. The brokerage stated that the stock was its preferred pick in the small-cap discretionary space with a strong brand presence in the amusement park category coupled with a lean balance sheet despite an asset-heavy model.

The brokerage maintained its 'buy' rating on the stock and lifted its target price upwards to ₹710 apiece, reflecting an upside rally of almost 23.60%.

Tata Communications

Tata Communications, a leading global digital ecosystem enabler, saw its shares climb from ₹974.55 apiece to ₹1,549.70 in the last one-year period, resulting in a stellar gain of 59%.

The company's recent agreement to acquire Kaleyra, a US-based omnichannel integrated CPaaS player, for an enterprise value of $250 million, is anticipated to bolster its position in the global CPaaS services market. ICICI Securities suggests that this acquisition, coupled with the existing acquisition of The Switch, can enhance Tata Communications' presence in the US and facilitate cross-selling opportunities, leading to improved market share in core connectivity and digital services.

Considering the positive revenue outlook, the brokerage has raised its valuation multiple for FY25E and adjusted the target price for Tata Communications to ₹1,810 per share, representing a new all-time high for the stock and offering a potential upside rally of 17% from its previous closing price.

DCB Bank

From a trading price of ₹81.95 on July 2022, shares of DCB Bank have zoomed 53.32% to the current trading price of ₹125.65 apiece. Between July and December 2022, the stock experienced a one-way spike, skyrocketing 90% to register a 33-month high of 141.20 apiece.

Brokerage firm Axis Securities has expressed confidence in the bank's growth trajectory. The brokerage said that after regaining its growth momentum in FY23, the bank is expected to sustain this positive trend as it focuses on doubling its balance sheet size within the next 3–4 years.

Notably, the bank's core segment collections have continued to improve, and slippages are at near-normalized levels.

Axis Securities anticipates muted credit costs and foresees no significant challenges in terms of asset quality. Additionally, according to the brokerage, the bank is expected to benefit from operating leverage, improved fee income, and moderate credit costs, which should offset the impact of lower Net Interest Margins (NIMs) going forward.

The stock is currently trading at an attractive valuation of 0.7x FY25E ABV, and the brokerage valued the stock at 0.9x FY25E ABV to arrive at a target price of ₹150 per share. This target price implies an upside potential of 19.3% from the stock's current market price. It also reiterated its 'buy' recommendation on the stock.

Federal Bank

Shares of Federal Bank, a leading private sector bank in India, have performed exceptionally well since the start of April 2020, generating a return of 285% to date. Meanwhile, Over the last one year, the shares have appreciated from ₹97.20 to ₹135.15, delivering a fabulous gain of 39%.

Axis Securities estimated that the stock still possesses further upward potential. The brokerage stated that the bank's business growth remains robust, exhibiting no visible signs of a slowdown. While margins may experience softness in H1FY24, improvements in the portfolio mix with higher-yielding products and stability in CoF are expected to enhance margins in H2FY24, it stated.

The brokerage said it remains confident in the bank's ability to deliver a consistent RoA of 1.3% despite margin pressures. The current valuations of 1.1x Sep’24E ABV are undemanding for an expected strong RoA/RoE delivery of 1.3%/15-16% over the medium term, and the brokerage has retained its 'buy' call on the stock with a target price of ₹155 per share, implying an upside of 15%.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.