For those who have an appetite for risk mid and small cap stocks could generate decent returns. In fact, over the last 1 year we have seen some decent recovery in both mid and small cap stocks. Here are 3 best mid cap and small cap stocks picked from Motilal Oswal Institutional Research reports and which can generate good returns.
Repco Home Finance
Brokerage firm Motilal Oswal sees an upside of as much as 59 per cent on the stock of Repco Home Finance. The firm has set a target price of Rs 290 on the housing finance company, as against its current market price of Rs 182.
"Over the past year, REPCO has reduced its dependence on capital market borrowings - 95% share of borrowings now come from banks and National Housing Bank (NHB).
Over the past year, REPCO has increased liquidity on the balance sheet from sub-1% to 3%+ of borrowings. However, issues of the past (sand mining and the registration ban in Tamil Nadu) continue to impact the company's growth. With the gradual lifting of the lockdown, we expect disbursements to pick up over the course of the year.
However, loan growth is likely to remain in the mid-single digits in FY21/FY22. Improvement in asset quality is encouraging; however, a clearer picture would emerge toward the end of this fiscal year. We cut our credit costs for FY21 to account for better than-expected collections, but marginally increase FY22 credit cost estimates. Maintain Buy, with target price of Rs 290 (0.8x FY22E BVPS)," the broking firm has stated in its report.
Motilal Oswal has set an upside potential of 25 per cent in the stock of SRF. The current market price of SRF is 4114, which implies a nearly 25 per cent upside potential against the target of Rs 5170 set by the firm.
"The management remains confident of achieving 20-25% revenue growth in the Specialty Chemicals segment (forms 23% of FY20 sales). It expects HFC gas demand to improve in 2HFY21 on the back of export opportunities, which are opening up for the company due to the current geopolitical issues.
Further, company has received approval from its Board to raise Rs 10b (equity of INR7.5b and balance through issuance of listed redeemable secured non-convertible debentures). We believe this is likely to be deployed toward the Chemicals segment. SRF has recently completed capacity expansion in the Packaging films segment," Motilal Oswal has said in its report.
The firm values SRF on an SOTP basis to arrive at Sep'22E target price of Rs 5,170, which is nearly 25 per cent higher from current levels.
Jubilant Life Sciences
Motilal Oswal also sees an upside potential of 18 per cent on the stock of Jubilant Lifesciences. The firm has set a target price of Rs 975 on the stock of the company.
"We expect a 4% earnings CAGR over FY20-22, led by a 2.5%/3.5% sales CAGR in Specialty Pharma / Specialty Intermediates-Nutritional Products as well as a steady EBITDA margin. The earnings CAGR is partially impacted due to COVID-19-led temporary slowdown in the Radiopharma, CDMO, and Life Sciences Chemicals segments.
We value JLS at 9x EV/EBITDA for the Pharma business and 4x EV/EBITDA for the LSI business, arriving at target price of INR975 on an SOTP basis. While the uptick in earnings growth is gradual (partly dented by COVID-19 in FY21), we remain positive on JLS on an attractive valuation of 7x FY22 EV/EBITDA. Maintain Buy," the brokerage firm has stated.
The above recommendations are taken from a reputed broking firm. We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please do consult a professional advisor.