Dolat Capital has pointed out that there are a number of factors that have improved sentiment. The sharp drop in gold imports, softening oil prices and temporary extension of timeline of US tapering has given rise to the present bullish sentiment in the market. The current liquidity-led rally can be sustained if there is growth in earnings and a favourable outcome of the general election scheduled next year. Here are their 10 recommended midcap stocks that are worthy of a buy for the medium to long-term
Rationale: Biopharma and contract research segment is expected to grow by 15% and 21% over FY13-15E. Strategic partnerships with BMS/Mylan ensures higher visibility in earnings going forward. Anticipate 24% earnings growth over FY13-15E.
Karur Vysya Bank: BUY
Rationale: Delinquency rates still lower than industry. Decline in NIM was sharp, expect to improve in 2HFY14.
Amara Raja: ACCUMULATE
Rationale: Huge replacement demand to drive growth. Huge capex to augur volumes
Berger Paints: ACCUMULATE
Rationale: Gap between Asian Paints and Berger Paints has widened. Premiumisation strategy has played out well for the company which has resulted in an improvement in operating margins.
Indraprastha Gas: BUY
Rationale: Not impacted by change in allocation of domestic gas to city gas distributors (CGDs) sector. Ability to maintain gross spreads though the gas cost is increasing. Current price seems to factoring the extreme negatives of the ongoing legal case with PNGRB.
KPIT Technologies: BUY
Rationale: Sustained strong volume traction. Volumes up 2%; Pricing up 1%. Demand momentum strong across SBUs. EBIT Margin down in Q2FY14.
Supreme Industries: ACCUMULATE
Rationale: Extensive range of products enabling SIL to play plastic consumption story. Ability to innovate and bring new plastic products in the market. Brand focus gives pricing power and increasing share of value added products.
IPCA Lab: ACCUMULATE
Rationale: Revenue growth of 20% and EBITDA margin at 23-24% for FY14e. Indore SEZ plant to contribute inFY15E. Institutional business to contribute Rs 4.5bn in FY14E and Rs 5.0bn in FY15e.
City Union Bank: BUY
Rationale: The rise in fresh NPL formations only temporary, overall asset quality much better than industry. Agility to hold on to the margins even in turbulent times.
PI Industries: ACCUMULATE
Rationale: Favourable portfolio mix to aid margin expansion backed by high visibility in CSM business. Anticipate 32% revenue growth over FY13-15E. Sustenance of elevated return ratios likely as new capacities turn accretive.