ICICI Securities Is Bullish On These 2 Mid Cap Stocks With Potential Returns Up To 27%

Updated: Tuesday, August 17, 2021, 9:43 [IST]

On Tuesday, the domestic equity market indexes BSE Sensex and Nifty 50 were off to a cautious start. The S&P BSE Sensex ended the previous session at 55,582, up 0.26 percent. The NSE Nifty 50 index ended the day at 16,563, up 0.21 percent.

Broking firm, ICICI Securities has suggested buying the stocks of TCNS Clothing and KNR Constructions. The firm sees gains of as much as 27% in the stock of TCNS Clothing and around 20% in the stock of KNR Constructions. Investors are also advised caution, as the Sensex is now at a record of 55,000 points.

Buy TCNS Clothing with potential upside of 27%

TCNS Clothing, founded in 1997, is a Mid Cap company in the Apparels sector with a market capitalization of Rs 3,484.02 crore.

According to ICICI Securities, through its three popular homegrown brands, TCNS has emerged as the market leader in the women's ethnic area, thanks to its multi-distribution channel approach and robust supply chain infrastructure.

ICICI Securities sees an upside of 27% in the stock of TCNS Clothing to Rs 700, from the current market price of Rs 553.

"Since our initiation report, the stock price has appreciated by ~38%. We maintain BUY rating on the stock with an unchanged target price. We value TCNS at Rs 700 i.e. 35x FY23E EPS", the brokerage said in its research report.

Key triggers for future price-performance:

In FY22, there will be a healthy store addition pipeline with the opening of 60+ additional stores on a net basis (40+ stores have already been inked).
Continues to expand its omni distribution channel by introducing new business models such as a third-party market place and developing 'online-first' product lines.
Creating a new integrated warehouse to improve supply chain efficiency and scale up B2C delivery (to be set up by December 2021)
15 existing stores were upgraded and expanded at favourable long-term leases in prominent malls and high streets.
Increasing focus on network expansion in tier III/IV cities, mostly through a franchisee-led strategy.

Buy KNR Constructions, Says ICICI Securities

KNR Constructions Ltd., founded in 1995, is a Mid Cap business in the Infrastructure sector with a market capitalization of Rs 8,361.10 crore.

According to broking fir, ICICI securities, irrigation, and urban water infrastructure management are two areas where the organization has a strong presence. Over the last three years, the company has reported a 24.5 percent revenue CAGR and has regularly delivered an industry-leading operating margin of 20%. Prudent management, no net debt, and strong return ratios (RoCE: >23%)

ICICI Securities sees an upside of 20% in the stock of KNR Constructions to Rs 340, from the current market price of Rs 284.

"KNR's share price has grown at 33% CAGR over the past five years. We maintain our BUY rating on the company. We value KNR at Rs 340/share," ICICI Securities said in its report.

Key triggers for future price-performance:

KNR is anticipated to be one of the biggest beneficiaries of the growing road and irrigation sectors (Jal Jeevan Mission)
Strong order book position, receipt of assigned dates in a majority of its projects, and execution pick-up will result in an 18.8% topline CAGR in FY21-23E.
The operating margin is expected to remain high due to a price escalation clause in the road agreement and higher profits at irrigation projects.
Asset-light strategy utilising monetisation to generate additional cash flows