4 Mid And Small Cap Stocks To Buy Where Motilal Oswal Sees Gains Up To 55%

Indices are once again trading at near record highs, and stock picking has become more difficult now. However, here are 4 stocks where broking firm Motilal Oswal has a buy call for good gains in the medium term.

Macrotech Developers: Gains of 55% expected

Motilal Oswal sees profits of up to 55% on the stock of Macrotech Developers, a real estate player. "We maintain our pre-sales estimate, but reduce our FY23 PAT estimate by 7% to reflect one-time provisioning. We incorporate lower repatriation from UK investments, both in NAV and cash flow estimates, resulting in a 3% decline in our target price to Rs 1,530, implying a potential upside of 55%. We remain confident on the company pre-sales growth trajectory as well its ability to build its future project pipeline. At the current market price, the stock trades at 1x P/NAV, indicating limited premium being assigned to growth beyond FY23. We maintain our Buy rating on LODHA," the brokerage has said.

Cholamandalam Finance

The brokerage sees an upside of 22% on the stock of Cholamandalam Investment. "We model disbursement/AUM/PAT CAGR of 32%/23%/19% over FY22-FY25, respectively. We cut our FY23E/FY24E EPS by ~3% each to factor in the margin compression and higher opex ratio. While we estimate a margin compression of ~60bp/20bp in FY23/FY24, respectively, we reiterate that it has levers on credit costs and business AUM growth to deliver a healthy RoA/RoE profile of 2.7%/20% over FY23-FY24. Maintain BUY with a target price of Rs 910 (based on 4.0x Sep'24 BVPS)," the brokerage has said.

Newer businesses contributed 21% to the disbursement mix in 2QFY23. Newer businesses spawned by CIFC, will exhibit an improving disbursement run-rate and will contribute ~10% to the AUM mix by FY24E. These will potentially drive RoA improvement.

Dalmia Bharat

Motilal Oswal has also a buy call on the stock of Dalmia Bharat, a major cement player. There is no target price that has been set on the stock by the company.

Dalmia Bharat's 2QFY23 operating performance was in line with estimates with EBITDA of Rs 3.8 billion and operating profit margins of 12.8%. Adjusted net profits (after MI) stood at INR270m (v/s estimated INR207m) fueled by higher other income.

"We like Dalmia Bharat due to its: a) growth plan to reach at 48.5mtpa capacity by FY24E, b) dominant presence in the high-growth market (East India); and c) emphasis on sustainability (focus on increasing renewable energy, alternative fuel and blended cement share)," the brokerage has said.

Mahindra and Mahindra Financial Services

According to Motilal Oswal, the company has maintained its leadership position in the Tractor and Mahindra UV financing segments, which has always been its strength. "While MMFS has exhibited a volatile operating performance and weak asset quality in the past, the various strategic initiatives undertaken by the management, if executed correctly, have the potential to script a credible transformation. A strong liability franchise and deep moats in rural and the semi-urban customer segment positions MMFS well to reap rewards of the hard work that is currently going into evolving this franchise. We will review our estimates after the earnings call on 3rd Nov'22," the brokerage has said.