More than two dozen midcap stocks eroded over one-fourth of investors’ wealth in 2022, when the BSE Midcap index gained just 1 per cent during the year. On the other hand, the BSE barometer Sensex increased by 4.4 per cent, while the broader index BSE Smallcap lost around 2 per cent for the year ended December 31, 2022. Market watchers believe that this is the right time to pick select midcap stocks after the recent correction.
With a fall of 62 per cent, Tanla Platforms emerged as the top loser in the midcap space. Shares of the company declined to Rs 713.80 on December 30, 2022 from Rs 1,888.45 on December 31, 2021. The company is the largest communication platform as a service (CPaaS) player in India. It has two major business: enterprise and platform, both using blockchain technology to reduce spam and fraud activities and make it easy to integrate with enterprise applications.
Brokerage Geojit Financial Services recently initiated coverage on the stock with a target price of Rs 920. “Due to operational headwinds, EBITDA margins squeezed in H1FY23, which is expected to improve during coming quarters by measures to minimising currency volatility in the earnings. On the view of a recovery in revenue and steady expansion of EBITDA margins, it is likely to show a boost in EPS during the period FY23–FY25E. Due to product price disruption, stock appears reasonable and currently trades at a PE of 17 times on FY25E, which is less than its 5-year average of 27 times,” Geojit Financial Services said.
Tata Teleservices (Maharashtra) (down 55 per cent), PB Fintech (down 53 per cent), Vodafone Idea (down 49 per cent), India Energy Exchange (IEX) (down 45 per cent), Sona BLW Precision Forgings (down 44 per cent), Dr Lal Pathlabs (down 41 per cent), Clean Science and Technology (down 40 per cent) and Aurobindo Pharma (down 40 per cent) stood among other major losers in the list.
Nuvama Institutional Equities is positive on PB Fintech with a 12-month target price of Rs 550. The brokerage believes that online financial products are an exciting space, and Policybazaar (PB) has carved out a niche for itself thereof.
“Low digital sales and insurance penetration underpin our growth conviction on this incipient segment. PB’s strategy of investing in alternate channels-appointments and POSP, not only augurs sustained volume uptick but also fortifies its bargaining power. Ascending renewals, efficiencies, and unit economics lie at the heart of PB’s improving profitability,” Nuvama said.
While sharing his view on IEX, Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas said, “On all-time frame charts, the stock is appearing oversold, and a pullback appears highly probable from a medium-term perspective. We believe that the stock is in the process of forming a long-term bottom for itself and has more upside potential than downside.”
In general, a couple of factors including the geopolitical war between Russia and Ukraine and rising interest rates weighed market sentiment in the past 12 months.
Data further showed that some other famous names from the midcap space including Glaxosmithkline Pharmaceuticals, Zee Entertainment Enterprises, Kansai Nerolac Paints, Hatsun Agro Product, Star Health and Allied Insurance Company, Biocon, Jubilant FoodWorks, Nippon Life India Asset Management, Dixon Technologies (India), Aavas Financiers also plunged somewhere between 25 per cent and 30 per cent in 2022.
Brokerage Sharekhan is bullish on Dixon Technologies with a target price of Rs 4,960. “Dixon Technologies with its leadership in outsourcing the EMS industry is well poised to be one of the key beneficiaries of the government’s impetus on increasing domestic manufacturing through PLI schemes. The company has been continuously expanding capacities in its existing verticals and is now backwards integrating and expanding into other verticals such as refrigerators, LED monitors, AC components, and other hardware products,” Sharekhan said.
The Ramco Cements, Laurus Labs, Relaxo Footwears, Max Financial Services, Godrej Industries, Coforge, Voltas, L&T Technology Services, Godrej Properties, Trident, ICICI Securities and Aarti Industries also plummeted between 30 per cent and 40 per cent in the last calendar year.
Commenting on broader markets, Nirav Karkera, Head of Research, Fisdom said, “India is experiencing the beginning of what could be a landmark era for India’s economic growth. With the conducive business environment along with domestic and global opportunities for Indian businesses, many mid and smallcap companies are on the trajectory of robust earning expansion.”
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