Ten Top-Quality Mid-Cap Stocks To Buy Now

Kshitij Anand of ET has spoken to leading experts like Vivek Gupta of CapitalVia, D K Aggarwal of SMC Investments, Amit Nigam of Peerless Fund, Vikas Gupta of Arthveda Fund, Hitesh Agrawal of Reliance Securities and others and collected their advice on the best top ten stocks to buy.

Apart from identifying the stocks, the experts have also given valuable advice on how to build a portfolio and the type of stocks to be chosen for it.

SRF (Target Price Rs 1,150)

The company has emerged as a niche chemical player on the back of its R&D strength and vast experience in fluorine chemistry, mainly catering to agrochemical and pharmaceutical companies.

We expect high margin chemical business to sustain high growth trajectory leading to improvement in its revenue contribution from 24% in FY14 to 34% in FY17E. Coupled with this, an expected cyclical recovery in packaging business could add thrust to overall growth and margins.

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Atul Auto (Target price Rs 683)

We are upbeat on Atul Auto’s growth profile, gaining confidence from soon-to-be-launched Petrol variant and its potential to explore the vast export market. Atul’s market share in goods carrier segment is 18% while in passenger carrier segment its market share is 5%. In terms of dealer network, Atul has a total of 325 touch points with 200 primary dealers and 125 sub-dealers and intends to grow by 25-30 dealers every year.

HSIL (Target Price Rs495)

The company’s building product division has grown at a CAGR of 22.6% in the last five years on the back of high demand in sanitaryware products and changing consumers’ preference towards premium and lifestyle products. We believe these drivers are intact. Recovery in container glass business will convert into better realizations and in turn improve the blended margins.

Treehouse Education (Target price Rs 550)

We expect Treehouse Education to register revenue CAGR of 24% over FY14-17E aided by robust addition of pre-schools, increase in capacity utilization of K-12 schools and additional revenue stream from day care services. The company intends to add 100-120 schools annually until FY17E while maintaining the ratio in favor of higher number of owned preschools.

Kansai Nerolac (Target Price Rs253)

The company, being the leader in the industrial paints, is expected to milk dual benefits of benign raw material environment as well as anticipated cyclical recovery in industrial business. We believe 300-400 bps YoY improvement in the gross margins will be partially negated by pass-on benefit to the trade. Nonetheless, we believe KNPL is a strategically strong story and are positive on the company.

Crompton Greaves Ltd: Target price Rs 230

After registering a 52-week high of 231, the stock is in a short-term correction phase and is sustaining below the falling trend line. It is likely to show northward journey again with the crossing of the resistance at the level of 181, where one may initiate the long position in the stock for the targets of 207/230. Immediate support of 155 can be placed as stop loss in it.

IDBI: Target price Rs 101

The stock is accumulating at the lower levels in long term charts and is having a crucial resistance at the level of 85. Further the stock is closing in green below this level from the last few trading sessions, and it is likely to show an upmove with the breakout of the mentioned resistance mark, where one may expect the stock to test the level of 101, if it sustains above the support level of 69.

PTC India Ltd: Target price Rs 115

PTC’s business model is most aligned to a sharp revival in the power sector demand through – i) signing more PSAs (lock untied capacity of 4GW), ii) growth in trading business volume and improving long-term volume to aid margins.

PTC has provided Rs267 mn in Q3FY15 for diminution in value of the remaining stake in Teesta Urja project, which is likely to reverse – as the regulated business model over 15% RoE should be achievable given that the project is 91% complete and no more surprise is expected.

Dish TV Ltd: Target price Rs 100

Dish TV reported an APRU increase to Rs177 in Q3FY15 compared to Rs163 in Q4FY14 due to the price hikes taken in Aug 2014. The company has increased its mid and economy package prices by 20% and 15% since FY14-end as it bridges the gap with other DTH players, while basic packages price increases were in line with industry averages.

We believe the recent hikes along with differential pricing will help sustain a 6%/7% ARPU increase in FY15/FY16 compared to 4% YoY increase in FY13/FY14.

Further triggers to the stock price are favorable regulatory developments with respect to taxation (GST), license fee reduction and industry sops.

Dewan Housing Finance Ltd: Target price Rs 544

Dewan Housing Finance (DHFL) primarily provides housing loans to self-employed members of the low and middle income group in tier 2-3 cities and metro peripheries where large HFCs and private banks have a limited presence.

The recent capital raising exercise of $130mn provided the company with the much needed capital to pursue faster asset growth. The increasing proportion of higher yield loan categories in the asset book will support yields.

Investors would and should continue to pay attention to high operating cost metrics, past media controversies and acquisition track record as potential red flags.