1 Midcap, 1 Smallcap Stocks Recommendation By Sharekhan For Upto 31% Return, 3.36% Dividend Yield

Nifty and Sensex are marginally bearish today, on June 17, after absorbing the initial impacts of the US interest rate hike. However, during this time of bear control on Dalal Street, investors should select the stocks wisely. Watching the stocks' potential in the long term is an important factor, along with their previous returns. Here one mid-cap and one small-cap stock have been mentioned, those were recommended by reputed brokerage firm Sharekhan.

Stock recommendations and performances

Sharekhan suggests investors buy the stocks of Finolex Cables Ltd. and Bata India for high near-term returns.

In Q4FY22, Total Income of Finolex stood at Rs. 1,18,685 lakh, PBT stood at Rs. 12,641 lakh, and Net Profit stood at Rs. 10,460 lakh, according to NSE data. It is a mid cap company with a market capitalization of Rs. 8,395 crore. Capacity expansion in wires and cables should also help the company grow its volumes going forward.

Bata India (Bata) registered strong performance in the backdrop of disruption caused by the third Covid wave by clocking revenues of Rs. 665 crore in Q4FY2022, which was ahead of pre-pandemic levels. Revenues grew by 13% on a y-o-y basis. Realisation growth of ~16%, better operating leverage and focus on cost efficiencies aided the company to post 539 bps improvement in EBITDA margins to 24.4% (improved by 433 bps q-o-q). Bata has a market capitalization of Rs. 20,908 crore. Additionally, Bata is offering a dividend yield of 0.25%, which will be profitable for its new and existing shareholders.

Comparison of stock prices & NSE market tracker

In this table the Current Market Price (CMP) and the Target Price (TP) of the recommended stocks have been mentioned.

Company	CMP	TP	1 Year Expected Return
Finolex	Rs. 363	Rs. 477	31.40%
Bata India	Rs. 1,802	Rs. 2,370	31.52%

For Finolex, the 52 week high level is Rs. 608.60, and the 52 week low level of the stock is Rs. 343.50. In the past 1 year the share price has fallen sharply by 25.99%, but in the past 2 years, its ahre price has risen by 33.82%, it was quoted at around Rs. 269, on June 19, 2020.

For Bata India, the 52 week high level is Rs. 2,262.00, and the 52 week low level of the stock is Rs. 1,550.00. Similarly, in the past 1 year the share price has fallen only by 2.72%, but in the long term this large cap stock is highly profitable. In the past 5 yeras, its share price has gained by 211.80% on NSE.

Comments By Sharekhan

Commenting on the stock potential of Finolex the brokerage firm mentioned, "We retain our Buy rating on Finolex Cables Limited (Finolex) with a revised target price of Rs. 477 given attractive valuation and a strong growth outlook. Finolex reported a healthy performance backed by robust volumes in electrical wires despite a challenging environment and intense competition. We expect demand to be robust from sectors like real estate, auto, industrials for its wires & cables business and expect scaling up of FMEG products."

About the stocks of Bata, Sharekhan said, "Casualisation of product portfolio, store expansion through franchisee & MBO route, renovation of existing stores and digital footprint expansion are some of the key growth levers which will help the revenue growth momentum to sustain in the quarters ahead. Focus remains on regaining volume growth. The stock trades at 60.6x and 39.8x its FY2023E and FY2024E earnings. We maintain a Buy on the stock with an unchanged target price of Rs. 2,370."

Disclaimer

The above stocks were picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.