These 2 midcaps, 1 largecap could offer better returns in the medium to long term

Sumit Bilgaiyan of Equity99 strongly believes that this Diwali will be ‘discount wali’ but the next one will be ‘dhamake wali hogi’

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Finally we have seen a smart recovery in the market from the lower levels that we predicted last week. The Nifty rose 523 points on a weekly basis led by banking stocks. Positive global markets, strong earnings, sharp fall in crude oil prices and appreciation in the rupee boosted sentiment last week.

For this week, the Nifty has strong support at 10,440-10,350 levels and resistance at 10,700-10,750 levels. A number of companies will announce their results this week. These include: State Bank of India, Cipla, GAIL India, Power Grid Corporation of India, Bosch and Titan Company.

There many important events also this week which will drive the market. US sanctions against Iran come into effect from November 4. US mid-term elections will be held on November 6. Outcome of the Federal Open Markets Committee meeting will emerge on November 8.

We strongly believe that this Diwali will be ‘discount wali’ but the next one will be ‘dhamake wali hogi’.

Here  is the list of top three stocks that could offer better returns in the medium to long term:

M&M Financial Services
Mahindra Finance is one of India’s leading non-banking finance companies focused on the rural and semi-urban sector; the company has over 5.6 million customers and has an AUM of over $8.2 billion.

It has reported excellent results for Q2FY19, income has improved by 38.6 percent YoY to Rs 2,103.3 crore while PAT increased by 132.6 percent to Rs 381.4 crore as against Rs 164 crore. Disbursement grew by 39 percent YoY to Rs 21,194 crore. PAT grew by 78 percent to Rs 650 crore in first half of FY19.

The overall loan book of the company increased by 26 percent to Rs 554.82 billion in first half of FY19. At CMP, the stock is trading at P/E of just 19.8x. It has paid 200 percent dividend for FY18. We are recommending a buy in staggered manner for medium to long term.

Amara Raja Batteries
With 26 percent equity each from the Galla Family and Johnson Controls (USA), Amara Raja Batteries (ARBL) is the technology leader and one of the largest manufacturers of lead-acid batteries for both industrial and automotive applications in the Indian storage battery industry.

ARBL supplies automotive batteries under OE relationships to Ford India, Honda, Hyundai, Mahindra & Mahindra, Maruti Suzuki, Ashok Leyland, and Tata Motors, Honda Motorcycles & Scooters India Private Ltd, Royal Enfield, Bajaj Auto Ltd among others.

Due to higher raw material prices, company had posted muted numbers for FY18 but we have seen some improvement in Q1FY19 numbers. Its sales and EBITDA grew by 18.8 percent and 14.2 percent YoY, respectively, while PAT increased by 13.2 percent to 113.03 crore. At the CMP, the stock trades at a P/E of 27.8x on TTM EPS. We are expecting strong numbers in Q2. We are recommending a buy in staggered manner for medium to long term.

Bajaj Auto

Bajaj Auto is the world’s 3rd largest manufacturer of motorcycles and the largest manufacturer of three-wheelers. First seven months of FY19 became golden period for company. During this period its motorcycles sales grew by 28 percent and commercial vehicles sales grew by 50 percent. Total sales grew by 31 percent. Company has achieved highest ever monthly motorcycle sales during October. Its motorcycle sales grew by 33 percent during October.

Due to higher raw material price we have seen some pressure on margin front during first half of FY19, but we are expecting margin improvement during second half of FY19. During Q2FY19, its sales and EBITDA grew by 21.21 percent YoY and 3.45 percent YoY, respectively, while PAT increased by 5.28 percent to Rs 1,256.57 crore.

During first half of FY19, its sales and EBITDA grew by 23.75 percent YoY and 17.32 percent YoY, respectively, while PAT increased by 13.20 percent to Rs 2,298.35 crore. At the CMP, the stock trades at a P/E of 17.1x. We are recommending a buy in staggered manner for medium to long term.

Disclaimer:-The views and investment tips expressed by investment experts are their own. Ripples Advisory advises users to check with certified experts before taking any investment decisions.

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