6 Midcap Stocks To Buy That Have The Potential For Superlative Returns

Updated: Monday, April 11, 2022, 11:06 [IST]

Broking firm, Motilal Oswal has come up with its latest report on the India Strategy, 4QFY22 Preview. According to the firm, the Nifty ended FY22 with gains of 19% YoY, marking another year of strong returns.

"Given the multitude of challenges (lockdowns announced due to the second COVID wave, rate hikes by the US Fed, withdrawal of excess global liquidity, Russia-Ukraine conflict, the relentless rise in commodity prices, disruption in supply chains, and weak rural demand), the fact that the Nifty is down barely 5% from its recent high underscores its resilience," the brokerage has said.

Buy midcap stocks, Macrotech and Dalmia Bharat

Among the midcap space, Motilal Oswal is bullish on Macrotech and Dalmia Bharat. "In Mid-Caps, we are adding Macrotech. The Rs 200 billion of completed and near completed inventory will drive strong sales on a sustained basis. Strong cash flows will help reduce Rs 70 billion in leverage over the next two years.

Dalmia Bharat is another midcap stock where the brokerage has a buy call. "It is a tactical play and after the recent sharp correction, the stock factors in current negatives in our view. It should benefit from aggressive capacity expansion plans (to 48.5mtpa by FY24E from 33.7mtpa now) apart from its cost-saving strategies. The stock valuation is attractive at 10.2x FY24E EV/EBITDA," the broking firm has said.

Buy Gujarat Gas and GR Infra

The other stocks that Motilal Oswal is recommending from the midcap space is Gujarat Gas and GR Infra. "For Gujarat Gas we expect the company's volume growth prospects to remain robust with the addition of over 60 new industrial units, undergoing expansions, and the emergence of a new ceramic cluster at Aniyari. Cooling of Spot LNG prices would also result in a quicker volume recovery for Gujarat Gas.

GR Infra has a strong balance sheet and it is set to traverse the journey from being just a Roads player to a diversified EPC player. Its order book now stands at Rs 230 billion (2.9x FY22E revenue).

"With robust execution capabilities, GR Infra is very well placed to capitalize on the growth opportunities," Motilal Oswal has said.

Lemon Tree and Restaurant Brands

"After the recent sharp rally, we are replacing Indian Hotels with Lemon Tree, which will benefit from the room additions carried out in the pre-pandemic phase, deleveraging in its balance sheet and addition of upscale brand Aurika Mumbai Hotel in CY23E. e). Restaurant Brands Asia (formerly Burger King India) offers an opportunistic play on the economy opening up over the next few quarters, especially with around half of its stores being based in malls (much higher than peers). With the recent correction, RBA trades at an attractive valuation of 18.8x consolidated FY24E EV/EBITDA (pre-IND AS), which is at a 37% discount to that of market leader Jubilant Foodworks," the brokerage has said.

Disclaimer

The stocks have been picked from the brokerage report of Motilal Oswal. 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.