Top picks: Jefferies suggests these Indian midcap stocks to buy, hold post Q1 results
1 min read 10 Aug 2022, 10:57 AM ISTJefferies said small and midcaps coverage has posted a mixed Q1 FY23 so far
PremiumGlobal brokerage Jefferies said in a note that its Indian small and midcaps coverage has posted a mixed Q1FY23 so far as while operating margin was robust in Crompton, V-Guard and Polycab, margins of durables (like Havells, Whirlpool) were below Jefferies estimates.
Meanwhile, building materials posted sturdy volumes (SI, Finolex, Kajarai Ceramics). While Kajaria Ceramics operating margin improved despite rising gas cost, margin of Supreme Industrie, Finolex Industries was impacted due to sharp PVC volatility.
Dixon Tech posted strong sales growth during the first quarter, with in-line operating margin. While the brokerage raised EPS in Kajaria Ceramics and V-Guard Industries, its FY23 EPS cut is sharper in Durables.
Sharing its top Indian midcaps stocks picks, Jefferies said that Crompton Greaves delivered better margins as compared to estimates and butterfly integration has been progressing well. Supreme Industries strong volume growth was led by diversified mix and margins could normalize, as PVC prices stabilize.
“Kajaria Ceramics reported solid volume growth margin expansion, Dixon Tech's robust sales growth was led by PLIs and Polycab India reported resilient operating margin and 3x PAT growth, despite copper volatility in Q1 FY23," it added.
Jefferies has Buy tags on Crompton Greaves Consumer Electricals with target price of ₹505 from ₹490, Dixon Technologies (TP: ₹5,305 from ₹5,300), Finolex Industries (TP: ₹195), Kajaria Ceramics (TP: ₹1,325 from ₹1,230), Supreme Industries (TP: ₹2,650), UPL Limited TP: ₹1,100) and V-Guard Industries (TP: ₹300)
Meanwhile, it has hold ratings on midcap stocks Whirlpool of India with target price of ₹1,775, and Havells India with target price of ₹1,340 from ₹1,330.
"Despite robust sales growth, operating margin of Havells and Whirlpool were below Jefferies estimates. Havells' margins were dragged by Lloyd yet again and sharp commodity volatility amid higher cost inventory in Cables & Wires. Whirlpool's gross margin declined by 300-400bps both YoY and QoQ. Factoring margin pressures, we cut FY24-25 eps by 1-3%, whereas FY23 cut is sharper," the brokerage stated.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
