Stocks To buy: 3 Mid & Smallcap Stocks Where Sharekhan Has A “Buy” Call

Broking firm, Sharekhan has recommended buying the stocks of Persistent Systems and Coforge, while having an 8% higher target on the stock of Shoppers Stop in its latest reports. The firm believes that these stocks have a good potential upside in the coming days. Here are some of the highlights from the reports and reasons for buying these select stocks.

Coforge Ltd

Current market price	Target price
3864	4680

According to Sharekhan, Coforge is well-poised to achieve its strong revenue growth guidance in FY2023E on the back strong order intake, recovery in travel industry, continued growth momentum in the BFS vertical, new logo addition, investments in leadership team and strong execution.

"Further, its executable order bookings for the next 12 months remain 80% of our FY2023E revenue estimates. Coforge is expected to clock a revenue/earnings CAGR of 14%/19.5%, respectively over FY2022-25E, implies a high growth among top mid-tier peers. At CMP, the stock is trading at a valuation of 28x/24x/21x of its FY2023E/FY2024E/FY2025E earnings. We maintain a Buy rating on Coforge with an unchanged price target of Rs. 4,680," the brokerage has said.

Persistent Systems: Buy for a price target of Rs 4300

Current market price	Target price
3704	4300

Persistent Systems Limited reported revenue of $255.6 million in Q2FY23, up 5.8% on q-o-q and up 40.2% y-o-y. Revenue in constant currency terms grew 6.6% on q-o-q basis led strong growth in the IP-led and Services business. While the revenue numbers were in-line with our estimates the beat came on the EBIT margin front which improved by 27Bps q-o-q (exceeded estimates by 86 bps) as annual wage hike taken in July was offset by higher IP led and Services revenues and favourable currency tailwinds.

"We expect margin headwinds to moderate and be offset by higher utilization, reduction in subcontracting costs and currency tailwinds. Given strong bookings, sustained acceleration in deal TCVs, strong execution capabilities Persistent Systems is likely to continue to deliver decent performance in the quarters ahead. We retain Buy on Persistent Systems with an unchanged price target of Rs. 4,300," the brokerage has said.

Neutral stance on Shoppers Stop stock, says Sharekhan

Current market price	Upside potential
794	8%

Shoppers Stop delivered the sixth consecutive quarter of strong revenue growth with improvement in profitability. The company's strategic pillars continued to deliver robust performance and the momentum is expected to sustain with the upcoming festive and wedding season. Management is eyeing revenue to double over the next five years, while it expects EBIDTA margin to expand by 400 bps. "Thus, Shoppers Stop is transforming itself into a consistent growth story in the retail space with strong focus on strengthening its balance sheet. However, Shoppers Stop stock price has run up by 44% in the last three months and current valuations of 14.7x and 12x its FY2023E/24E EV/EBITDA factor in the near-term earnings growth prospects. We maintain our Neutral stance on the stock with a potential upside of 8% from current levels and wait for a better entry point to enter the stock," the brokerage has said.

Markets to remain sideways

According to market experts, the Sensex can trade in a range for sometime, given the way interest rates are likely to rise across the globe. Hence, investors are advised to buy only selectively into stocks and avoid large scale exposure. A buy on decline strategy would be good at these levels.