3 SMID stocks to buy: Jefferies prefers Supreme Industries, V-Guard & Amber Enterprises

Foreign brokerage Jefferies in its latest note said it is bullish on electronics manufacturing services (EMS) companies due to India's indigenisation drive, while it likes business-to-business (B2B) capex plays and housing as a theme. Among small and midcap (SMID) stocks in the electrical segment, it finds Supreme Industries Ltd, Amber Enterprises Ltd and V-Guard Industries Ltd as its preferred picks, even as it also has 'Buy' ratings on Voltas Ltd, Blue Star Ltd, and Finolex Cables Ltd. 

Jefferies said it prefers Supreme Industries due to its consistent execution, with strong volume growth. Besides, it likes Supreme Industries' margin-accretive, value- added mix at 37 per cent of overall sales in FY24. It finds V -Guard Industries as a diversified play on appliances. Sunflame synergies are supporting top-line and margin growth, it noted. 

The foreign brokerage said Amber Enterprises India is de-risking its sales from AC manufacturing and is evolving as a play on margin-accretive components. 

"Amber is the only EMS company which improved Ebitda margin, by 40 bps YoY, whereas Kaynes, Dixon saw 20 bps YoY declines. Syrma SGS saw the sharpest Ebitda  margin decline within EMS space (-230 bps YoY), leading to PAT decline," it noted. 

Despite a strong Q1, Jefferies has cut Amber's EPS estimate by 2-4 per cent, as FY25e near-term revenue guidance of subsidiary Sidwal was cut to flattish YoY against +15-20 per cent earlier, impacted by delay in projects and execution. 

Jefferies said it likes the business models of Kaynes Technology India Ltd, Pidilite Industries Ltd, Astral Ltd, and  Havells India but rate them 'Hold', mainly due to rich valuations. It has 'Underperform' ratings on Dixon Technologies and Whirlpool of India.