Q1 Review: Mold-Tek Packaging, Pitti Engineering, Welspun Living are Axis Securities’ top 3 mid-cap picks — here’s why
Mold-Tek is expected to grow with new capacities, Pitti Engineering is seeing improved EBITDA margins from acquisitions, and Welspun Living has achieved significant export growth despite global challenges.
Among midcap stocks under Axis Securities, Welspun Living, Mold-Tek Packaging, Pitti Engineering, and Kirloskar Brothers have reported positive demand trends and revenue growth in the June quarter (Q1FY25).
However, the brokerage noted that logistical and supply chain disruptions posed challenges for some of these firms, which impacted their revenues.
In its review note, Axis Securities stated that Praj Industries Ltd saw a decline in both revenue and its order book during the quarter, primarily due to weaker demand in the bio-energy segment.
However, the brokerage highlighted the potential improvement in the situation as the Government of India has initiated discussions on revising ethanol prices. If implemented, this revision could boost demand in the bio-energy segment, potentially benefiting Praj Industries in the coming quarters.
Mold-Tek Packaging, Pitti Engineering and Welspun Living are top 3 midcap picks post the Q1 earnings
Mold-Tek Packaging: The brokerage has a buy call on the stock with a target price of ₹882, implying an upside potential of almost 14%.
The brokerage projects accelerated growth in the coming quarters as new capacities and products in FF (Food & FMCG), paint, and pharma packaging start contributing to its revenue. The company expects to realise the full impact of the three plants and pharma packaging in the second half of FY25 as their operations scale up.
Mold-Tek anticipates achieving double-digit volume growth, supported by an improved margin profile. The company expects EBITDA per kg to exceed ₹40, driven by the introduction of value-added products and an increased contribution from the high-margin Pharma segment.
Pitti Engineering: The brokerage has a buy call on the stock with a target price of ₹1,572, indicating over 14% upside potential.
PEL recently expanded in South India through the acquisitions of Bagadia Chaitra Industries Pvt Ltd (BCIPL) and Dakshin Foundry Private Ltd (DFPL), with the merger of Pitti Castings Pvt Ltd (PCL) also in progress.
These acquisitions are expected to complement PEL's existing offerings and drive strong revenue growth and cost savings. Despite one-off acquisition expenses, the company saw an improvement in EBITDA margins due to operating leverage from increased volumes. The company aims to surpass its annual volume target of 63,000 tonnes and improve EBITDA per tonne, particularly in the BCIPL business. Furthermore, capacity utilisation reached nearly 90% during the quarter, with DFPL already showing superior margins.
Welspun Living: Axis Securities has a buy rating with a target price of ₹224, reflecting nearly 15% upside potential.
Despite challenges like the Red Sea issue and global macroeconomic uncertainties, the company achieved 20% YoY growth in exports, surpassing the industry trend and boosting margins, highlighted Axis. It also emphasised that strong demand from the US, particularly for the upcoming holiday season, supports the management's revenue growth guidance of 10-12%.
Domestically, Welspun is focused on expanding its market share in emerging and branded business segments, which is expected to improve future margins. Capacity expansion projects, including the Jacquard towel production in Anjar and a fully automated pillow manufacturing unit in Ohio, are on track to begin operations in Q3 FY25, further noted the brokerage. Additionally, the flooring business, though flat YoY due to logistical issues, is gaining traction in the Middle East and from major retailers in the US and UK, with anticipated 20-25% CAGR and margin improvements in the coming years, it said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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