Review Of Best Mid-Cap Stocks By Nirmal Bang

We expect the companies in our mid-cap coverage universe to post muted revenue/EBITDA/net profit growth of 7.4%/12.2%/6.5%, respectively, for the March 2015 quarter. Taking into account the current challenging environment, CCL Products (CCL), Credit Analysis & Research (CARE), V-Mart Retail (VRL), Just Dial (JDL), La Opala RG (LORL), and Kajaria Ceramics (KCL) are expected to post good results while Bata India (BIL), Adi Finechem, Supreme Industries (SIL) and V-Guard Industies (VIL) are likely to report a weak performance. Additional volume and zero income-tax at Vietnam plant of CCL is likely to drive its net profit up 74.9% to Rs285mn. Healthy growth in paid listings and operating leverage would drive JDL’s EBITDA 39.2% to Rs520mn. Growth in distribution network, launch of new products and better margins would drive LORL’s net profit 27.2% to Rs108mn. Healthy growth in SME (small and medium enterprise) rating business would aid CARE’s growth. Better product mix, lower power & fuel costs and also operating margin improvement by 49bps to 16.5% would benefit KCL. In the wake of healthy store addition driving revenue and also better margins because of lower cotton prices and lower shrinkage ratio, operating profit would grow 42.9%, despite lower same-store sales growth because of weak demand, in case of VRL. With the revival in domestic profitability, better profit at RAK unit and capacity expansion, JBF Industries would post a 18.2% rise in EBITDA to Rs2,337mn. Lower footfalls and suply chain pressure would exert pressure on same-store sales growth of BIL. Weak demand at Brand & Retail division, and lower cotton prices and weak volume growth in textile business would hurt Arvind’s revenue and profitability. Healthy MDF (medium density fibre) board division’s revenue would partially offset subdued demand for plywood in case of Greenply Industries or GIL. Subdued domestic growth at 7.5% and weakness in the euro may impact Sylvania’s performance, but lower pension liability on a high base is the saving grace for Havells India or HIL. Inventory loss because of a fall in crude oil prices would hurt SIL. Delay in capacity expansion, high margin base because of one-offs and downturn in tocopherol (35% of revenue) would lead AFL to report a steep decline in net profit. Revenue of global investment banks, key clients of Crisil, continue to remain under pressure and as a result Crisil’s revenue is likely to remain under pressure. Following weak non-rating business revenue, overall revenue growth is expected to remain muted in case of ICRA. Inventory loss because of lower copper prices and weak demand would hurt VIL.

Download 4QFY15 Mid-Cap Sector Preview-13 April 2015