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Top 10 midcap stock picks by JM Financial to beat the COVID-19 heat

Updated : 2020-05-20 16:10:49

The midcap index has fallen over 25 percent just in 2020 amid coronavirus led market selloff. JM Financial in a recent report listed out 10 midcap stock ideas to look at during the COVID-19 crisis. These recommendations by the brokerage include Can Fin Homes, JK Cement, Kansai Nerolac, KEC International, Manappuram Finance, among others.

 Can Fin Homes’  stock price has nearly halved in the past 2 months on concerns due to the spread of COVID-19 and the impact of the current lockdown on its business. The brokerage believes this is a stern test for the company but expects it to navigate the current crisis smoother than its peers in the sector. The brokerage remains optimistic about stock's asset quality but believes growth would take a beating, with the company set to deliver its first sequential decline in AUM in the first quarter of FY21.
Can Fin Homes’ stock price has nearly halved in the past 2 months on concerns due to the spread of COVID-19 and the impact of the current lockdown on its business. The brokerage believes this is a stern test for the company but expects it to navigate the current crisis smoother than its peers in the sector. The brokerage remains optimistic about stock's asset quality but believes growth would take a beating, with the company set to deliver its first sequential decline in AUM in the first quarter of FY21.
 JK Cement:  The brokerage maintains 'buy' on expected improvement in EBITDA per tonne, owing to favourable mix and generation of Rs 2,500 crore operating cash flow, to result in deleveraging of balance sheet.
JK Cement: The brokerage maintains 'buy' on expected improvement in EBITDA per tonne, owing to favourable mix and generation of Rs 2,500 crore operating cash flow, to result in deleveraging of balance sheet.
 Kansai Nerolac:  The company is a subsidiary of the Kansai Paint Company, Japan. It operates in decorative and industrial paint segments. The brokerage believes companies of the likes of Kansai Nerolac with its strong track record and healthy balance sheet are relatively well placed to absorb shocks like COVID-19 related lockdowns. Going forward, the company’s revenue, EBITDA and earnings to grow at CAGR of 5 percent, 14 percent and 20 percent respectively in FY19-22.
Kansai Nerolac: The company is a subsidiary of the Kansai Paint Company, Japan. It operates in decorative and industrial paint segments. The brokerage believes companies of the likes of Kansai Nerolac with its strong track record and healthy balance sheet are relatively well placed to absorb shocks like COVID-19 related lockdowns. Going forward, the company’s revenue, EBITDA and earnings to grow at CAGR of 5 percent, 14 percent and 20 percent respectively in FY19-22.
 KEC International:  The company believes the recent stock price correction of KEC International offers a very good investment opportunity as the company is relatively well placed to tackle the current challenging environment. It expects the limited impact of COVID-19 on its business as many projects are being executed at remote locations.
KEC International: The company believes the recent stock price correction of KEC International offers a very good investment opportunity as the company is relatively well placed to tackle the current challenging environment. It expects the limited impact of COVID-19 on its business as many projects are being executed at remote locations.
 Manappuram Finance:  Manappuram Finance is one of the large NBFCs in India predominantly dealing in gold loans. The company, which was incorporated in 1992 and listed in 1995. Manappuram Finance’s stock has fallen over 40 percent from its peak in January 2020. It currently trades at inexpensive valuations and thee brokerage believes the risk-reward is favourable and hence the stock remains a buy at current levels.
Manappuram Finance: Manappuram Finance is one of the large NBFCs in India predominantly dealing in gold loans. The company, which was incorporated in 1992 and listed in 1995. Manappuram Finance’s stock has fallen over 40 percent from its peak in January 2020. It currently trades at inexpensive valuations and thee brokerage believes the risk-reward is favourable and hence the stock remains a buy at current levels.
 Polycab India : Polycab is a market leader in India’s Wire & Cable industry with an 18 percent share in the organized market and a 12 percent share in the overall market.
Polycab India: Polycab is a market leader in India’s Wire & Cable industry with an 18 percent share in the organized market and a 12 percent share in the overall market. "Although we continue to be positive on Polycab a lot depends on the ongoing COVID-19 situation and how soon the lifting of lockdown takes place and manufacturing operations to start," said the brokerage. Polycab’s being a market leader and strengthening its position in the broader FMEG space and strong performance has been a testament to the fact that once normalcy returns in the macroeconomic Polycab will be a big beneficiary, it added.
 Tata Consumer Products : As per the brokerage, the stock could trade up over the coming months given optimism surrounding the merger of Tata Chemical’s consumer business that will increase the salience of domestic business in its revenue-pie. It added that hopes being built that a new outsider CEO (Sunil D’Souza - currently MD of Whirlpool India) would make the business a much more growth-oriented and efficient one.
Tata Consumer Products: As per the brokerage, the stock could trade up over the coming months given optimism surrounding the merger of Tata Chemical’s consumer business that will increase the salience of domestic business in its revenue-pie. It added that hopes being built that a new outsider CEO (Sunil D’Souza - currently MD of Whirlpool India) would make the business a much more growth-oriented and efficient one.
 Tube Investment:  The company will see a significant impact on its business from the spread of COVID-19 and the current lockdown but diversified revenue streams with dependence on different products and the segment will help it navigate the current crisis, said the brokerage. Strong management pedigree, diversified revenue streams, market leadership in key products, low impact due to disruption from electric vehicles, optionality from new product investments, net debt-free status and high ROE are key reasons to buy the stock, it noted.
Tube Investment: The company will see a significant impact on its business from the spread of COVID-19 and the current lockdown but diversified revenue streams with dependence on different products and the segment will help it navigate the current crisis, said the brokerage. Strong management pedigree, diversified revenue streams, market leadership in key products, low impact due to disruption from electric vehicles, optionality from new product investments, net debt-free status and high ROE are key reasons to buy the stock, it noted.
 Voltas : The brokerage continues to be positive on Voltas but said that a lot depends on the ongoing COVID-19 situation and how soon the lifting of lockdown takes place and manufacturing operations start. It believes that normalcy will resume in discretionary spending towards the AC business in FY21. Key risks to our call would be sustained market share loss in room AC segment and cost overruns in the EMP segment, it added.
Voltas: The brokerage continues to be positive on Voltas but said that a lot depends on the ongoing COVID-19 situation and how soon the lifting of lockdown takes place and manufacturing operations start. It believes that normalcy will resume in discretionary spending towards the AC business in FY21. Key risks to our call would be sustained market share loss in room AC segment and cost overruns in the EMP segment, it added.
 Westlife:  The company is well-placed to leverage the attractive Western Fast Food opportunity, which currently accounts for just about 2 percent of India’s Informal Eating-Out market, said the brokerage. McDonald’s’ steadfast focus on innovation, premiumisation, and diversification into segments of the future, while simultaneously delivering a strong basic value proposition to its core consumers, are the key drivers of its success, it added.
Westlife: The company is well-placed to leverage the attractive Western Fast Food opportunity, which currently accounts for just about 2 percent of India’s Informal Eating-Out market, said the brokerage. McDonald’s’ steadfast focus on innovation, premiumisation, and diversification into segments of the future, while simultaneously delivering a strong basic value proposition to its core consumers, are the key drivers of its success, it added.
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