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Stocks To Buy: 1 Smallcap Stock & 1 Midcap Stock From Sharekhan For 22% Returns

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Broking firm Sharekhan has recommended buying the stocks of Century Plyboards and Bata India for good gains. The brokerage sees returns of up to 20% for the stock of Century Plyboards, while the returns for Bata India are far lesser at around 12%.

 

Buy Century Plyboards says Sharekhan

Buy Century Plyboards says Sharekhan

Current market priceRs 413
Target price Rs 505
Gain% 22.00%

According to Sharekhan, among the key positives for the stock is the strong performance in revenues and operating profit margins in MDF and particle board.

In July 2021, the company reported revenues, which reached July 2019 levels, showing robust demand. According to Sharekhan the company has also affected a price hike across products to counter rise in raw material price rise.

"Century Plyboards is expected to witness a revival in demand and operating profit margins from Q2FY2022 onwards as it remains upbeat on demand emanating from residential segment.

The company has been able to generate strong operating cash flows increasing treasury surplus which should aid in capacity expansions going ahead. The stock is currently trading at a P/E of 30 times and 24 times its FY2023E and FY2024E earnings, which we believe provides further room for upside, considering its strong growth outlook and healthy balance sheet. Hence, we have maintained a Buy rating on the stock with an unchanged price target of Rs. 505," the brokerage has said.

Buy the stock of Bata India, says Sharekhan
 

Buy the stock of Bata India, says Sharekhan

Current market priceRs 1705
Target price Rs 1905
Gain% 11.19%

Sharekhan has placed a buy on the stock of Bata India, though it is not as upbeat on the stock for gains as it is with Century Plyboards.

According to the brokerage revenue contribution from the online platform has increased to 15% in Q1FY2022. The Gross margin improved by 307 bps q-o-q to 56.2% due to better mix, Sharekhan has said.

Bata India posted resilient performance with revenue at Rs 267 crore and operating losses declining by 60.5% y-o-y to Rs. 34 crore, led by stringent cost-saving measures and better gross margins.

"We have broadly maintained our earnings estimates for FY2022 and FY2023. Post the easing of lockdown, the company has started witnessing growth in footfalls in its stores. Improvement in mobility in the coming quarter augurs well for faster recovery. Bata is focusing on expanding its presence through e-commerce/omni-channels and innovated its product portfolio with new relevant variants to drive growth in the medium to long term. Under the new leadership, growth is expected to improve with revamped strategies, backed by strong liquidity position. The stock is currently trading at 47.2 times its FY2023E EPS and EV/EBIDTA of 20.2x FY2023E," the brokerage has said.

Disclaimer

Disclaimer

Investors should certainly not take any trading and investment decision based only on information discussed in this article. We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature, which is taken from the brokerage report of Sharekhan. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.

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