Midcaps have been great performers when compared to largecaps and have beaten them by a distance in terms of returns. Here are a few midcap stocks that are attractive buys from a long term perspective.
Power Finance Corporation
What makes Power Finance Corporation a geat mid cap stock idea is its dividend yield. The stock at the current price of Rs 145 fetches you an attractive dividend yield of 5%. The company is a major player in the power finance business, including finance to big power projects. In fact, it is one of the largest NBFC players in terms of networth. Now, the growth of the company has been stupendous in the past. Loan assets in FY 2016 surged to Rs 2,37,642 crores from Rs 21,17,000 crores. Its net profits have also surged over the years and also its dividend payouts.
Huge potential for growth
The government has targeted power for all by 2019. The Power For All (PFA) documents envisage building generation, transmission and distribution capacities along with operational efficiency and reform measures. Almost all of the states & Union Territories have signed PFA documents. Apart from this the government has planned a thrust of Rs 10,000 crores for renewable energy. Going ahead we believe this leaves a fantastic opportunity for Power Finance Corporation in terms of business prospects. Now coming to fundamentals, the company reported an EPS of Rs 7.39 for the quarter ending Dec 31, 2016. What this means is that it is capable of reporting an EPS of Rs 30 in the Financial Year 2017, making it one of the cheapest midcap stocks available at valuations of less than 5 times. This is of the best midcap stocks to own. Check price of Power Finance Corporation
Rural Electrification Corporation
This is another stock that we like for its fundamentals and also its dividend yield.
At current market price the stock yields a dividend of 5.4 per cent. The company has been providing funding assistance for power generation, transmission & distribution projects besides for Village Electrification programme. The company is among the few in the space that has very low level of NPAs. Check stock quote of REC here
The NPAs as a percentage of Gross Loan Assets stood at 2.11 per cent, which is not bad at all. Going ahead REC is likely to continue to grow quickly thanks to the government mission of "power for all" by 2019.
REC is another fundamentally undervalued midcap stock, which makes it a good pick at the current levels. The stock is quoting at a valuation of just 5.4 times one year forward p/e multiples and at a price to book value of just 0.9 times. The stock recently hit a 52-week high and if prices dip a little lower, it maybe time to buy into the stock. A good buy at the current levels of Rs 175.
Karnataka Bank is another midcap stock that is still attractive, though the stock has hit an almost 52-week high. The dividend yield may not be as high as the two companies that we have mentioned earlier, but, based on valuations the bank is not a bad bet. We believe that in the next few months, we might see a sharp recovery in non performing assets making this bank cheap at the current market price of Rs 138.
Why to buy Karnataka Bank?
Karnataka Bank is likely to report an EPS of Rs 25 at the very least in 2017-18. This makes the stock available at a p/e ratio of just about 5 times one year forward earnings. The price to book is also attractive at the current price of 138. For example, the price to book is just 0.9 times, which is hardly justified for a private sector bank. A good stock to buy at the current levels.
This article is not a solicitation to buy or sell in shares mentioned above. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author of this article do not accept culpability for losses and/or damages arising based on information in this article. The author and his family do not hold shares in the above mentioned stocks.