Markets have been highly volatile in the short term. The last 1-year has seen negative returns in many stocks, due to rising interest rates. Here are 3 midcap stocks to buy for short-term investors as recommended by Emkay Global. The holding period on these stocks is 1-year.
Bank of Baroda: Credit growth improving
Bank of Baroda saw overall credit growth improving to 10% yoy/6% qoq, led by retail and agri growth. According to Emkay Global, the SME growth was subdued, given the bank's conscious risk-averse stance.
"Corporate growth was also sub-par. Within retail, growth has improved across segments, with housing growing at 11% yoy after a weak performance in Q3. Gold loans also grew at 25% yoy. The CASA ratio declined marginally, but remained high and healthy at 42%. The bank reported healthy NIMs of 3.1%. It believes that the higher share of floating rate book, healthy CASA ratio and lower interest reversal on NPAs will lead to a robust margin trajectory," Emkay has noted. Fresh slippages were higher at Rs 58 billion (3.2% of loans), including Future Retail. However, higher recoveries/woffs, led to a 64 basis points reduction in the GNPA ratio to 6.6%. The standard net restructured book declined to 2.4% of loans in Q4 from 2.8% in Q3, with a lower relapse rate as of now.
Buy the Bank of Baroda stock with a price target of Rs 130
"Factoring in better growth/NIMs and lower LLP, we expect the bank's RoE to gradually improve to 11-13% over FY23-25E from 9% in FY22 and 1% in FY21. BOB is better-positioned to accelerate growth while also maintaining profitability. Retain Buy with an overweight stance in EAP revised target price of Rs 130 (earlier target price on the stock of Rs 145), based on 0.7x FY24E ABV (0.9x Dec'23E ABV earlier) due to higher CoE. Key risks," Emkay Global has said. The firms sees higher NPA formation, mainly in the corporate/SME book and slower-than-expected growth trajectory, as key risks for the stock. The shares of Bank of Baroda were last seen trading at Rs 100.25, which implies a near 30% upside potential on the stock if investors, buy the stock at the current market price. The time frame to achieve the target price s a short term period of 1-year.
Buy Tech Mahindra shares a for 33% upside
Emkay Global has an upside on midcap IT Stock Tech Mahindra of 33% from the current levels. The firm believes it is a good stock to buy now, as deals were healthy. Tech Mahindra's Q4FY22 revenue came in line with Emkay's expectations, but EBITM missed its estimates. Revenue grew 4.9% QoQ to USD1,608mn (5.4% CC), led by Enterprise (5.8%) and CME (4.8%). EBITM declined 160bps QoQ to 13.2%.
Net new deal wins were robust with a TCV of USD1,011 mn, split across CME (USD645mn) and Enterprise (USD366mn). FY22 deal intake grew 48% YoY to USD3.3bn. The deal pipeline remains healthy, and it expects healthy deal win momentum to continue.
Tech Mahindra: Buy the stock with a target price Rs 1600 in next 1 year
Emkay Global says that the management remains confident of sustaining revenue growth momentum on the back of broad-based demand, solid traction in the CME biz (uptick in digital transformation demand led by 5G spends), healthy deal intake and deal pipeline, and robust demand for digital engineering, cloud, data analytics and cyber security services. "We cut our FY23/FY24 EPS estimates by 7.5%/6.8%, factoring in the Q4 performance, recent acquisitions, and lower margin assumptions. Strong revenue growth momentum and a ~4% dividend yield will support valuations, although the stock lacks near-term triggers after a big miss on margins. We maintain Buy with a target price of Rs 1,600 (Rs 1,730 earlier) at 22x Mar'24E EPS," the brokerage has said.
Escorts: Buy the midcap stock with a price target of Rs 2140
Emkay has set a higher target price of nearly 38% from current levels on the stock of Escorts. Emkay has a price target of Rs 2,140 on Jun'24 estimates. Emkay expects a 13% revenue CAGR over FY22-24E, aided by 21%/13%/11% growth in the CE/Railways/Agri segments. Agri segment growth should be driven by a recovery in domestic volumes and robust exports. "We value core at 22x P/E and cash at Rs 390 per share (0.80x book); core P/E is at a 10% premium to fair P/E (backed by DCF), and captures potential upside from farm implements in India and higher exports. To arrive at a fair value, we have assumed a 5% EPS dilution, due to the merger of Kubota Agricultural Machinery India and Escorts Kubota India," the brokerage has said.