The domestic market is teeming with optimism.
Equity benchmarks the Sensex and the Nifty extended their winning streak into the seventh consecutive session on April 11.
The Sensex has jumped 4.4 percent while the Nifty is up 4.5 percent in the last seven sessions while the overall market capitalisation of BSE-listed firms has risen up to nearly ₹264.5 lakh crore from ₹251.9 lakh crore on March 28, making investors richer by ₹12.6 lakh crore.
Expectations of healthy fourth-quarter earnings, easing inflation, a pause in rate hikes by the RBI, the return of foreign portfolio investors and improving macroeconomic indicators have underpinned market sentiment.
The gains now appear to be slightly stretched and there may be some profit booking in the short term which will be an excellent opportunity to buy quality stocks across segments as the long-term outlook of the market remains positive.
MintGenie talked to several analysts to know about their favourite stocks from the mid and small-cap space. Here are seven stocks that look sound on fundamental parameters for the medium to long term.
Recommendations of Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities
RateGain is a leading travel and hospitality industry-specific SaaS player, focused on revenue maximization for clients.
The analyst expects the company to benefit from expanding its product suite, wallet share gains and recovery in travel and hospitality spending.
Further, a healthy balance sheet allows for strategic acquisitions to enhance product portfolio and expands the addressable market.
"Going ahead, we expect strong revenue and PAT CAGR (compound annual growth rate) of nearly 42 percent and 136 percent, respectively, over FY22-25E. Hence, we are positive on the stock with a fair value (target price) of ₹450," said the analyst.
Nykaa is the largest speciality BPC (beauty and personal care) platform in India in terms of products sold in FY2021 and one of the fastest-growing fashion platforms in India, per RedSeer.
"Going ahead, we expect strong revenue and PAT CAGR of nearly 33 percent and 100 percent over FY22-25E on the back of healthy growth in BPC and fashion businesses. We are positive on the stock with a fair value of ₹215," said the analyst.
The analysts believe that the company will report healthy growth in both segments due to lower online penetration compared to China and USA, expanding omnichannel capabilities and constant investment in building the Nykaa brand portfolio.
Recommendations of Kaustubh Pawaskar, DVP Fundamental Research at Sharekhan by BNP Paribas
PNC is one of the best picks in the road development sector because of its strong execution capabilities, healthy balance sheet, robust order book, and prudent capital management, the analyst pointed out.
PNC has in-house manufacturing capabilities, which provide it with the ability to execute projects on time.
The company has a strong order book of over ₹19,000 crore which comprises 2.8 times TTM (trailing 12 months) standalone revenues. It eyes ₹8,000-10,000 crore order intake per annum during FY23 and FY24.
The company is looking at divesting some of its assets in the near term out of eight assets earmarked for monetisation. The same would substantially reduce consolidated debt and free up equity capital for future investments in new project acquisitions.
On standalone earnings, the company is attractively valued at a P/E (price-to-earnings ratio) of 11 times and 10 times its FY24 and FY25 net earnings. Valuation offers favourable risks-reward.
Lemon Tree Hotels is one of the strongest brands in the mid-market segment with a 17 percent market share in India. It has 8,303 rooms under various brands (including Lemon Tree, Red Fox and Keys) and is planning to add another 2,605 rooms over the next three years.
Room demand would exceed supply over the next four-five years. Supply will moderate due to a significant increase in construction costs.
As per the brokerage firm, the company expects a 20 percent growth in revenues (will cross ₹1,000 crore) and EBIDTA to reach over 50 percent in FY24.
A new hotel under the premium Aurika brand (669 rooms) in Mumbai is to be operational by October 2023. It will add ₹200 crore to the EBIDTA in FY25.
"Occupancy is to hit 75 percent in Q4 (from 67.6 percent in Q3) with Lemon Tree (excluding Keys) reporting an over 80 percent occupancy while Keys will have close to 60 percent occupancy. ARRs (average room rates) to be three-four percent higher versus Q3FY23 (nearly 30 percent higher versus Q4FY20). Strong earnings growth visibility and attractive valuations of 11 times and 8 times its FY24 and FY25 EV/EBIDTA make it a preferred bet in the discretionary space," said the analyst.
As per the analyst, Gujarat Fluorochemical is the best bet in India’s fluorochemical space as its strong presence in fluoropolymers and massive capex plan of ₹2,500 crore would drive a robust earnings growth of 32 percent CAGR over FY22-25E.
GFL is more than doubling capacities in new fluoropolymers to 18 ktpa, focusing on new age verticals and expanding core PTFE/ref-gas capacities.
The management is addressing investor concerns on related party transactions and already received ₹632 crore. The management has guided revoking all bank guarantees given by GFL for loans of Inox Group companies by end-FY24.
"GFL’s valuation of 17.6 times FY25E EPS (earnings per share) is at a steep discount versus peer Navin Fluorine despite a similar earnings growth outlook/RoE. A steep fall of 31 percent in GFL’s stock price from a 52-week high provides an attractive investment opportunity," said the analyst.
Recommendations of Akhilesh Jat, Category Manager - Equity Research, CapitalVia Global Research
A variety of consumer goods are produced and sold by Crompton Greaves Consumer Electricals. Lighting items (luminaries and light sources) and electrical consumer durables are the company's core offerings.
Three years in a row, the company's annual revenues and EBITDA have climbed. Crompton is the market leader in the domestic fan industry capturing a market share of 27 percent. The company has increased its focus on growing its market share in the kitchen appliance area which can be beneficial in future.
Arvind Fashions produces and distributes denim and other textile goods all over the world. The company is on track to meet its objectives for profitable growth, working capital reduction and increasing cash flows.
The growth in revenue is expected ahead of network development. It anticipates higher margins due to increased operating leverage and greater full-price sales. It will keep putting more effort into debt reduction and improving inventory turns, which will produce higher cash flows.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.