Feel left out of midcap party? Here are 10 stocks to help you join in

Mid-cap and small-cap stocks have been on a roll in the past year. The BSE Mid-cap index has not only scaled new highs in the past few weeks, but has also outperformed the largecap index so far this year, gaining 20% compared with the Sensex’s 11% gain. The upcoming September quarter results could see the party continuing. Nearly a dozen mid-caps could surprise the street in terms of both topline and bottomline on robust consumer demand and a strong order book. ET picks 10 such stocks from brokerage recommendations, whose prices could race ahead on an upside in performance.

CITY UNION BANK CMP: Rs 140.05
City Union Bank, with a retail-oriented business, may report good performance, while other banks may report weak numbers. The bank is expected to benefit from improving access to end markets and capital and physical infrastructure because of structural resets. “Among mid and small-cap banks, City Union Bank is our top pick and we expect strong margins and controlled asset quality to support RoAs at about 1.55%.” said Nitin Bhasin, analyst at Ambit Capital.

DCB BANK CMP: Rs 123.75
DCB’s loan growth (28% YoY) and deposit growth (20% YoY) would be above industry average. Non-interest income is expected to grow by 43% YoY, on strong growth in trading gains. It is one of the cheapest among private banks with FY17 price-to-book of 1.8 times. “We expect revenue growth to have similar contribution for NII and non-interest income,” said MB Mahesh of Kotak Institutional Equities. “We expect PAT to grow about 22% YoY despite elevated costs.”

KALPATARU POWER CMP: Rs 253.80
It is trading at a P/E of 15.5 times its FY17 earnings, at a discount to its two-year average P/E of 19.31 times. Analysts believe strong outlook in the domestic T&D market and increasing presence in high-growth areas like railways should help the company deliver nearly 20% earnings CAGR over FY 2016-18. “We expect a strong revenue growth of 26% YoY in September quarter as execution picks up in projects won over the last 6-9 months,” said Pawan Parekh of HDFC Securities.

MINDA CORP CMP: Rs 109.75
Analysts expect the operating margin of Minda Corp to improve in the September quarter due to operating leverage benefi ts and improvement in the profi tability of Minda Furukawa JV. It is trading at an attractive valuation of 15 times FY17 estimated earnings. “We expect consolidated revenues to grow by 24% YoY, led by strong growth in standalone business and impact of consolidation of Minda Stoneridge and Panalfa fi nancials,” said Sanjeev Prasad of Kotak Institutional Equities.

MUTHOOT FINANCE CMP: Rs 343.70
Muthoot Finance is expected to report one of its best quarters, supported by strong gold prices. Margins are likely to improve YoY on better auction realisation, increase in lending rates and declining funding costs, said analysts. The stock is trading at 2.2 times FY17 estimated book against 2.7 in the previous year. “We maintain buy recommendation with a target price of Rs 405 as net interest income is expected to grow 31% YoY in September quarter,” said Alplesh Mehta of Motilal Oswal.

PI INDUSTRIES CMP: Rs 824.90
PI Industries is expected to report healthy numbers with a combined revenue growth of 20%. Its domestic business growth is likely to be driven by the good performance of new products such as Keefun and Vibrant — both of which are gaining traction. “The consistent augmentation in its pipeline, resulting in innovator products, and the visible pipeline of high-margin in-licensed products could lead to a 20% EPS CAGR over FY2016-18,” said Girish Solanki of Anand Rathi.

RALLIS INDIA CMP: Rs 230.15
Rallis shares trade at 23.6 times FY17 estimated earnings, cheaper than its peers — PI Industries, Dhanuka Agritech and Vinati Organics. This could be a strong quarter on a weak base for it, but Rallis India will have to take full losses of Metahelix. This will lead to PAT before minority interest growth of 19% fall to 16% on post-MI basis. “We expect agriinputs to grow by 16% and seeds revenues to grow at 20% YoY with better margins” said Satish Mishra of HDFC Securities.

TECHNO ELECTRIC CMP: Rs 300.85
Techno Electric has capabilities to serve the whole power space, including transmission, distribution and generation, helping it adapt to changing trends. “Techno Electric shows all the hallmarks of a top-notch contractor,” said Nitin Bhasin of Ambit Capital. “We expect revenue of 26% and EPS CAGR of 34% over FY2016-18 in the EPC business. Valuations of 16 times of the EPC business FY18 estimated EPS is expensive but strong FCF profi le justifi es the multiples.”

TRIDENT CMP: Rs 54.20
Trident reported strong volume off-take in home textiles due to strategic initiatives and efforts taken in the past like strengthening marketing team, expanding global reach and widening product offerings. “We are overweight for medium to long-term investment,” said an analyst with Firstcall Research. “Trident will focus on marketing efforts and is on track to optimally utilise its global scale capacities. This will help it generate signifi cant free cash fl ows.”

WABCO INDIA CMP: Rs 6,095.85
Analysts estimate Wabco’s revenues to increase by 18% YoY, led by higher content per vehicle due to mandatory ABS in MHCVs from October 1, and growth in the after-market segment. “We expect earnings momentum to remain strong at a CAGR of 35% over FY2016–18, driven by steady MHCV demand, implementation of stricter safety standards driving ABS revenues, and healthy margins, although royalty hike would be a drag,” said Ambrish Mishra, analyst, JM Financials.