4 Small & Midcap Stocks To Buy After A 7% Fall In The Stock Market Indices

Aditya Birla Fashion and Retail

Emkay Global is optimistic on the stock of Aditya Birla Fashion and Retail and says the company's performance stood out in terms of per-store recovery for Lifestyle EBOs at 110% in Q2 vs. peers at 70-80%. According to the broking firm, the faster recovery in the relatively more impacted Pantaloons segment and the strong pick-up in the wholesale channel (MBO+LFS) on festive stocking, can surprise ahead.

"Faster recovery trends, aggressive portfolio/store expansion and improving efficiencies drive our positive stance on Aditya Birla Fashion and Retail. Valuations at 27x/22x FY23/FY24E EBITDA (pre-IndAS) are at a discount to peers. We have a Buy rating on Aditya Birla Fashion and Retail with a Dec'22E target price of Rs 340, based on 30x Dec'23E pre-IndAS EBITDA. Delay in full unlocking remains a key downside risk to estimates," the brokerage has said.

The shares of Aditya Birla Fashion and Retail last changed hands at Rs 262 on the NSE. 

 

Bharat Forge

Emkay Global is also bullish on the stock of forgings maker, Bharat Forge, and has a buy call on this midcap stock. "Our positive view is underpinned by Bharat Forge's leadership position in automotive forgings, focus on diversification and expected recovery in the core segments," the brokerage has said.

According to Emkay Global, the company's revenue growth is expected to be robust at a 19% CAGR over FY22-24E, driven by strong recovery in domestic MHCV industry production, growth in export CV segments due to a revival in North America Class-8 trucks industry; consistent growth in the PV segment and recovery in other industrial segments.
"Medium-term performance will also be aided by high-potential segments such as Defence, Railways, Aerospace and Aluminium parts. We have a buy rating on the stock with a price target of Rs 950," the brokerage has said.

The stock of Bharat Forge was last trading at Rs 703. 

Birlasoft

Emkay Global also has a buy on small cap IT stock Birlasoft. The firm has set a Dec 2022 target price of Rs 550 based on 25x Dec'23E EPS.

"The management remains confident of sustaining revenue growth momentum and delivering mid-teen revenue growth in FY22 on broad-based demand, healthy deal intake (ACV remains robust although reported TCV not reflecting strength YoY), robust deal pipeline (up 50% YoY) and improving win rates, growing annuity revenue, and anticipated recovery in Enterprise Solutions. The company is well on track to achieve aspirational goal of USD1bn revenue by Mar'25 with an EBITDAM of 18%," the brokerage has said.

Shares of Birlasoft were last changing hands at Rs 483.80.

Sunteck Realty

The brokerage has also recommended buying the stock of small cap realty player Sunteck Realty with a Dec'22E target price of Rs740 on the stock based on 1.2x NAV (Development NAV of Rs 618 + NAV premium of Rs 124). "Further upside is possible from faster monetization of non-core land," the brokerage has said.

"On a trailing 3-yr moving average basis, sales may witness a 27% CAGR in FY21-FY24E. Further, we estimate core ROE improving to 11% by FY24E as both construction and sales cycle gains traction," the brokerage has further added in its latest report.
According to Emkay the key risks include delay in JDA formation, slower than estimated execution, rapid reversal in interest rate cycle resulting in high interest rate environment.

Disclaimer

The above small and midcap stocks have been picked from the latest brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.