Samvat 2073: Top 10 Diwali Picks From Nirmal Bang Securities

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The broader markets have outperformed the benchmark indices in Samvat 2072 with BSE mid-cap index soaring 24 per cent and the small-cap index rallying 20 per cent. Here are some of the top midcap and smallcap stock recommendations from Nirmal Bang Securities for Samvat 2073.

1) VST Tillers Tractors (Target Rs. 2,415): The brokerage expects VST’s volumes to post 11 per cent CAGR over FY17-19, backed by strong demand recovery, new launches in tiller space and higher HP (horse power) tractors.

2) Power Mech Projects (Target Rs. 790): Its strong order book of Rs. 3,500 crore may result in 17 per cent and 24 per cent CAGR growth in revenue and net profit respectively over FY16-FY18, the brokerage says. The stock trades at an attractive valuation of 6.5 times its FY18 estimated earnings per share.

3) JK Cement (Target Rs. 1,205): Its white cement business is key value driver for the company with 60 per cent of its operating profit and 30 per cent of its revenues coming from this segment, the brokerage said. Per capita consumption of white cement in India is extremely low and it could rise, leading to brighter growth prospects for JK Cement, it added.

4) KCP (Target Rs. 122): The brokerage believes cement prices in Andhra Pradesh will remain stable which will result in significantly better return ratios for the company and also help reduce leverage.

5) Mangalam Cement (Target Rs. 411): The company is focusing on cutting costs and improving its market share. Its widening footprint and technology upgradation will result in better efficiency parameters for the company, the brokerage said, adding that Mangalam Cement shares are one of the cheapest among small-cap stocks in cement sector.

6) Inox Leisure (Target Rs. 354): The brokerage believes that significant valuation gap (30 per cent lower in PE terms and 21 per cent lower in EV/EBITDA terms on FY18 estimated earnings) that exists between Inox and PVR would be bridged as return ratios of the two converge on the back of better margins for Inox due to an improving revenue mix, maturing of screen portfolio and growth in operating metrics.

7) Manappuram Finance (Target: Rs. 130): The company has embarked on a strategy of diversifying into microfinance, home loan, commercial vehicle financing. The brokerage believes return on assets/return on equity to improve further by 30 basis points and 440 basis points to 3.2/17.6 per cent respectively in FY2018.

8) Shaily Engineering Plastics (Target: Rs. 811): The company’s ability to manufacture innovative products on a consistent basis with superior quality at low prices earned a place for itself in the list of preferred suppliers for many big domestic and international clients, the brokerage said. Its revenue and net profit is expected to grow at a CAGR of 13/36 per cent respectively over FY2016-19, the brokerage said.

9) Swaraj Engines (Target 1,429): Going forward, demand outlook remains strong with recovery in tractor sales visible across most states in India, the brokerage said. Structural drivers for domestic tractor growth story are strong, which should result in a 10 per cent compound annual growth rate (CAGR) for the industry over the next five years, it added.

10) Cipla (Target Rs. 700): The brokerage expects high teens to mid-twenties growth in Cipla’s earnings over the next five year driven by ANDA approvals in the US.