Sharekhan Picks 6 Small Cap & Mid Cap stocks From Building Materials Sector, Buy For High Returns

Building Materials Sector

According to sharekhan, Raw material pressures felt across the board: The building material sector reported a 15.8% y-o-y revenue growth (Hi-tech & Supreme beat estimates) led by healthy demand environment and pricing growth. However, excluding Hi-tech, all companies lagged in terms of OPM (down 472 bps y-o-y). The PVC pipe players suffered on account of inventory losses led by sustained decline in resin prices during Q2FY2023. The wood panel and tile companies suffered due to rise in key raw material prices along with increased power & fuel costs. Overall, net earnings were down 25.7% y-o-y. Overall, although revenues stayed in-line, lower-than-expected OPMs led to miss on net earnings. Hi-tech and Greenlam reported better than expected net earnings while APL Apollo, Pidilite and Greenpanel reported marginally miss.

Brokerage, commenting on the valuation, said, "We expect building materials sectors to benefit from strong demand although higher raw material prices pose a challenge in the near term."

1. Century Plyboards (India) Ltd (CPIL)

Century Plyboards is a small-cap company with a market capitalisation of Rs 12,001.78 crore. The company is primarily engaged in the manufacturing and sale of Plywood Laminates Decorative, Veneers, Medium Density Fibre, and allied products.

Sharekhan recommends buy the stock with an estimated target price of Rs 700 per share. The brokerage said, "We have lowered our net earnings estimates for FY2023, factoring in weak margins in MDF and particle board. We broadly retain our estimates for FY2024."

According to the given target price, the stock is likely to give up to 31% gains if the stock is purchased at the current market price. The stock's current market price is Rs 543.15 per share, trading 0.14% up from its previous close. Today, it opened at Rs 538.30 per share. The stock in a year has fallen 7.51%, however, in 3 years it has given a multibagger return of 210.66%. The stock in 5 years, has given 72.51% positive returns. 

2. Greenlam Industries Limited

Greenlam Industries is a small-cap stock having a market capitalisation of Rs 4,223.14 crore. The company is engaged in the business of manufacturing laminates, decorative veneers and allied products. 

Sharekhan has placed a buy call on the stock with a target price of Rs 420 per share. The brokerage claims a potential upside of up to 25% with the given target price. "We have fine-tuned our net earnings estimates for FY2023-FY2024, factoring marginally lower volumes and OPM in laminates," the brokerage has said about the stock. 

The stock today opened at Rs 336.80, currently trading at Rs 332.25 per share. Its 52-week high is Rs 1,997.40 and its 52-week low is Rs 279.80, respectively. It has given 1.38% in 1 week, and 2.62% in 1 month, respectively. In 1 year, it gave 12.57% positive returns, in 3 years, 69.97% positive returns and in 5 years, gave 57.16% positive returns. 

3. Greenpanel Industries Limited

It is a small-cap company engaged in the manufacturing of plywood, medium-density fibre boards (MDF) and allied products. It has a market capitalisation of Rs 4,740.78 crore.

The brokerage has placed a buy call on  Greenpanel Industries' stock for decent gains of up to 32% for a target price of Rs 505 per share. Commenting on the stock, the brokerage said, "We have marginally lowered our estimates for FY2023-FY2024 factoring in weaker Plywood margins." 

The stock is currently trading at Rs 383.60 per share, 0.79% down from its previous close. It opened at Rs 388.90 per share. Its 52 week high is Rs 625.70 and 52 week low is Rs 330.40, respectively.

It is a multibagger stock, with 740.04% returns in 5 years, however, in 3 years, it gave 3.69% positive returns. In 1 year, it has fallen, giving 15.13% negative return. However, in the past 1 week, it surged by 8.39% and in 1 month by 3.97%, respectively. 

4. APL Apollo Tubes Limited

APL Apollo is one of India's leading branded steel products manufacturers. It is a mid-cap company with a market capitalisation of Rs 28,603.31 crore. 

Sharekhan recommends buy the stock with a target price of Rs 1275 per share for decent gains of up to 12%. The brokerage said, "We have lowered our FY23 earnings estimates to factor in lower margin assumption partially offset by the elimination of minority interest, as Apollo Tricoat is merged with APL Apollo Tubes. We largely maintain our FY24-25 earnings estimate." 

The current market price of APL Apollo Tubes' stock on NSE is Rs 1,146.35 per share, trading 2.31% up compared to its previous close. Its 52-week high is Rs 1,177 and its 52-week low is Rs 770.90, respectively.

It has given 5.48% positive returns in 1 month, and 11.25% in 3 months, respectively. In 1 year, it gave 24.06% in positive returns. In 3 years, it gave 630.39% multibagger returns and in 5 years, it gave 478.16% multibagger returns. 

5. Kajaria Ceramics Limited

Kajaria Ceramics is a mid-cap company engaged in the manufacturing and trading of ceramic and vitrified tiles in India. It has a market cap of Rs 18,845.97 crore. 

The brokerage recommends buy Kajaria Ceramics' stock with a target price of Rs 1300 per share. Sharekhan has said, "We have marginally revised our estimates downwards for FY2023- FY2025E, factoring in lower OPM." 

The brokerage claims a potential upside of up to 11% if the stock is brought today at the current market price. The stock is currently trading at Rs 1180.25 per share on NSE, 2.51% up from its previous close. 

The stock in a week has given 13% positive returns, whereas, in 1 month it gave 8.46% positive returns. In 1 year it surged by 5.04%. in 3 years, it gave 120.28% multibagger returns. In 5 years, it gave 64.38% positive returns.

6. Supreme Industries Limited

It is a Mid-cap company with a market capitalisation of Rs 31,244.80 crore. The company operates in various product categories viz. Plastic Piping System, Cross Laminated Films & Products, Protective Packaging Products, Industrial Moulded Components, Storage & Material Handling Products, Moulded Furniture, Performance Packaging Films and Composite LPG Cylinders.
Sharekhan placed a buy call on Supreme Industries' stock with a target price of Rs 2,520 per share
"We have lowered our estimates for FY2023-FY2024, factoring in lower OPM," the brokerage has said. 

With the given target price the stock is likely to gain up to 2.5% if the stock is purchased at the current market price. The current market price of the stock is Rs 2,458.55 per share, trading 0.96% up from its previous close. It recorded its 52 week high at Rs 2,480 and 52 week low at Rs 1,666.25, respectively. 

It has given 7.95% in 1 week, 8.66% in 1 month and 25.01% in 3 months, respectively. In 1 year it gave 6.21%. In 3 years, it gave a multibagger return of 115.71% and in 5 years, it gave 112.8%, respectively. 

Disclaimer

The stocks have been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.