The markets have come crashing down in trade once again, thanks to rising bond yields in the US and a sell-off across global markets. Here are 2 stocks to buy from the midcap and small cap space that is attractive on account of its valuations and future prospects.
Improved margins & attractive valuations, reasons to buy the stock of Ramkrishna Forgings
Sharekhan has a Buy on the stock of Ramakrishna Forgings with a revised price target of Rs.238, due to strong revenue growth, improved margin profile and attractive valuations. This is a small cap stock.
Apart from this the other reason to buy the stock of Ramakrishna Forgings is the strong results posted by the company.
"Ramakrishna Forgings beat expectations on all fronts in Q4FY22 with revenue, EBITDA and net profits that grew by 31.9% y-o-y, 40.3% y-o-y and 142.9% y-o-y. Revenues were ahead of expectations, led by higher sales, while net profits increased estimates, driven by deferred tax adjustments. The management maintained its guidance to improve revenues by 20-25% in FY23E, driven by the company's diversified revenue streams and increasing contribution from value added products.
Strong global footprint
Ramkrishna Forgings has a strong global footprint and is serving to leading OEMs, not only in the automotive segment but other sectors as well. "We expect the company to gain market share internationally, as it has completed its major capex. The company's earnings are likely to clock a strong 29.3% CAGR, driven by a 14.7% CAGR in domestic revenue, a 27% CAGR in export revenue and a 15.9% growth in EBITDA. The stock is also available below its historical average multiples at P P/E of 8.4x and EV/EBITDA of 4.9x on its FY2024E estimates. We reiterate a Buy rating on the stock with a revised price target of Rs 238," the brokerage has said,
Ramkrishna Forgings supplies to various sectors like Automotive, Farm Equipment, Railways Bearings, Oil & Gas, Power and Construction, Earth Moving & Mining, both in India & overseas markets. The stock of Ramkrishna forgings was last seen trading at Rs 175 on the BSE.
L&T Finance Holdings
L&T Finance Holding is another stock to buy as being recommended by Sharekhan from the midcap space. The company reported a net profit of Rs. 341 crore versus street expectation of Rs. 400 crore in Q4FY2022. PAT grew by 28% y-o-y and 10% q-o-q.
This was primarily on account of muted operating performance. PPoP declined by 22% y-o-y and 4% q-o-q. Net interest income (NII) fell by 14% y-o-y and was flat sequentially on account of moderate loan book growth. Opex to AUM increased by 8 bps q-o-q to 2.8% in Q4FY2022. This was due to the company's investment in digital capabilities, employee hires, and expansion in meeting centres.
However, Sharekhan is maintaining its buy ratings on the stock with a price target of Rs 100. "We maintain our Buy rating on the stock with a revised price target of Rs. 100. The stock trades at 0.9x/0.8x its FY2023E/FY2024 book value. We believe the company is a long-term opportunity on economic growth, revival in credit growth, particularly the rural segment, recovery in housing sales, and infrastructure financing. The company has drawn up a four-year business strategy to retailise its balance sheet through growth in urban and rural business, which is encouraging after its strong rural book performance in Q4FY2022. Additionally, its plan to reduce overall wholesale portfolio bodes well for the company. Its collection efficiency surpassing pre-COVID levels across retail segments, augurs well for its future growth plans. We believe consolidation in loan book has reached the bottom and the company is set to see decent growth going ahead. Hence, we maintain our Buy rating on the stock with a revised price target of Rs. 100," the brokerage has said.
The shares of L&T Finance Holdings were last seen trading at Rs 79.50 on the NSE.