Best Midcap Stocks To Buy In India

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    Midcap stocks have been on a roll in 2017 and in 2018, they might not be big drivers. You would have to be very selective or run the risk of losses. This is because the Sensex is now at 34,600 points mark, which is not very far away from the peak. Here are a list of midcap stocks that could be good bets from a long term view and could be bought in 2018.

    Century Plywoods

    Century Plywoods is a good midcap stock to buy for those willing to hold the shares for the long term. Promoters continue to have a very high stake in the company at 72 per cent.

    The quarterly numbers of Century were not very good, because of stabilization issues at the new MDF plant.

    However, there are a few things that could work in favor of the company going forward. Among these include the shift in demand for plywood from the organized to the unorganized sector as GST has come into force.

    Secondly, the expansion of additional 2 lines in the laminates unit, 1 line of which has become operational from January 21, 2018 and would be reflected in the numbers of the June quarter.

    Century Plyboards: Good bet

    The Solar Panel project, which is already installed in Chennai with 1056 KWP is expected to generate 1.4 million units per year and save 1.12 crores annually in Electricity bill based on current charges.

    The company plans to install in all other units additional 5013 KWP which would bring total group generation at 6MWP which is equivalent to 7.35 million units .

    A strong brand equity, solid expansions plans, high promoter stake and proven track record is what makes the stock of Century Plyboards an interesting bet. 

    The stock is available at a p/e of just 20 times, one year forward earnings. Buy the same for long term investing. Check stock quote of Century Plyboards here 

    Sadbhav Engineering

    Sadbhav Engineering Ltd (SEL) is one of the top EPC contractors for transport, mining and irrigation. Now the order book as on March 31, 2018 stand at Rs 13,249 Crores at a gross value which translates
    to an order book to sales ratio of 3.47 times of FY 2018 revenue.

    There are huge opportunities coming up in the road sector post the Bharatmala project announcement. It want be a surprise to see the order book from roads itself jumping to Rs 8,000 crores in 2018.

    Interestingly, despite being in a capital intensive business the company has been regularly making profits since inception and paying dividends.

    The company has implemented over 7,551 lane kms since inception.On the bidding side, Sadbhav will start with the road segments where there are five projects in EPC segment from MSRDC that is Mumbai-Nagpur Expressway of length 283 kilometers worth Rs.10150 Crores for which bids have been submitted but are yet to be opened up. 

    Financial performance of Sadbhav

    The company has reported a good set of numbers all along. The company is looking at systematically reducing debt. In fact, the debt to equity which was 1.08 by the end of March 2017 has come down substantially by the end of 2018.

    For the quarter ending March 31, 2018 the company reported a profit after tax of Rs 68 crores. This translates into an EPS of Rs 4.11. For 2018-19, the company can achieve an EPS of Rs 18.

    If you accord a p/e of 20 times, considering the huge order book position and reduction of debt, the stock should trade closer to Rs 360.  

    A good midcap stock to bet for the long term. Check stock quote of Sadbhav here

    Karnataka Bank

    Karnataka Bank is a mid-sized private sector bank, whose shares have always been a little undervalued. In fact, the stock at Rs 108 is quoting even below the book value of Rs 182. In fact, the stock is quoting on cum dividend basis of Rs 3 per share. 

    The bank is targeting a business turnover of Rs 1 lakh crores by 2020. The management has guided for business growth of 17 per cent by the Financial Year 2018 to Rs.1,10,000 crores with a focus largely on the back of growth in the retail sector. Slippages and asset quality are likely to improve as we see economic recovery.

    Also read: Best largecap stocks to buy

    Karnataka Bank: Cheap on the valuations front

    Karnataka Bank is a stock that is not very expensive on the valuations front and is one of the cheapest when it comes to private sector banking stocks. The share also gives a good dividend yield of near 3 per cent. In fact, if the bank hikes the dividend for 2018-19, the yield could improve even further.

    Check stock quote of Karnataka Bank here

    We believe the bank can report an EPS of Rs 15 by 2018-19. If you value the p/e at 10 times this EPS, the stock should trade at Rs 150 at the very least. The stock has the potential for an upside of 40 per cent from the current levels, if one can hold for 2 years. A decent midcap stock to bet in 2018.

    Also read: Best smallcap stocks to buy

    Chennai Petroleum

    Chennai Petroleum uses crude oil to refine the same into petrol, diesel and other petroleum products. It is a subsidiary of Indian Oil Corporation.

    The first thing we need to state is that since the company uses crude oil to manufacture petroleum products, much of its profitability depends on how crude oil behaves. So, let us begin by predicting how crude oil could behave. We believe that crude oil is unlikely to dip for some time now. This is because there is more than adequate supply of crude.

    Now, let us take a look at the fundamentals of Chennai Petroleum reported. The company for FY 2017-18 reported an EPS of Rs 61. Based on the same, the p/e is exactly 5 times at the current market price of Rs 300.

    This is a low p/e stock and a good bet for another reason and that is the solid dividend yield. Chennai Petroleum declared a good dividend of Rs 21 per share. This gives you a yield of 5 per cent tax free dividend yield on a price the current share price of Rs 297.

    However, if crude oil continues to rally, this stock could fall. In that case, the dividends would surely be lowered. 

    How are midcap stocks taxed?

    Midcap stocks are taxed in the same way as all other shares. If there is a short term capital gains, you are taxed at the rate of 15 per cent. Short term capital gains here is defined if you sell the shares before one year at a profit. On the other hand if you have stocks that are sold after one year, there is a capital gains that is applicable at the rate of 10 per cent, if your profits are over and above Rs 1 lakh.

    This has been introduced by Finance Minister Arun Jaitley in this year's Union Budget 2018. This will ensure that you start paying long term capital gains that is payable. 

    Disclaimer

    The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author and his family do not own any shares in the above mentioned stocks.

     

     

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