​​10 midcaps that delivered up to 523% returns in year of rebound

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​​10 midcaps that delivered up to 523% returns in year of rebound


NEW DELHI: After falling for two straight years, midcap stocks made a splash in 2020, handsomely rewarding those investors who lapped up these second-rung stocks with both hands.

Data showed two of every three BSE Midcap index stocks are ending higher for the year, while one of every two are beating Sensex’s 15 per cent return, and the top 10 delivering up to 523 per cent gains.

Two Adani Group stocks led the gainers in the midcap space. Adani Green Energy rallied a whopping 523 per cent for the year while Gautam Adani’s flagship Adani Enterprises spurted 136 per cent.

In the case of Adani Green, the company has stated aggressive growth plans to expand operational capacity to 25 GW by FY25, nearly nine times from 2.8GW it had in the first half of FY21.

“Strong resource mobilisation capacity (land, funding), technology-driven O&M excellence and de-risking strategies have been the key pillars of this growth. Investors should monitor Adani Green’s delivery on growth targets and fund allocations to ESG theme before taking an investment decision on the stock,” Macquarie said in a note.

O&M stands for operations and maintenance.

“We have seen a major surge and big rerating in RIL as a stock. We will see a similar thing in Adani group stocks, as people have not participated that much in the Adani Group,” said N Jayakumar, MD at Prime Securities.

L&T Infotech delivered 108 per cent return for the year. The stock gained as the order pipeline grew stronger after a slump in the first half of FY21. The IT firm has bagged seven large deals worth $456 million in total contract value in the last 12 months, with a $207 million contract with the West Asia-based cloud provider Injazat as the key highlight. The company management is looking to keep PAT margin in the 14-15 per cent range. Analysts are quite positive on the stock.

Shares of Tata Consumer Products climbed 87 per cent in 2020. YES Securities views Tata Consumer as ‘a solid structural story’ with both growth and margin tailwinds that can deliver industry‐leading earnings growth over the next few years.

Edelweiss Alternative Research said the stock may get included in the Nifty index in the forthcoming semi-annual index rebalancing. An inclusion in the index can attract $88.7 million worth of flows to Tata Consumer, the report said.

Shares of Info Edge traded at Rs 4,624 on Monday compared with Rs 2,530.80 on December 31, 2019, up 84 per cent. The company runs job-hunting platform Naukri.com, has investments in at least 23 startups and owns about one-fifth of Zomato, the largest Indian web-based food delivery platform.

Abhay Agarwal, founder at Piper Serica PMS, likes Info Edge as it has some good properties like Zomato, PolicyBazaar, Naukri.com.

“These are all industry leaders. When we look at their valuation benchmarks with global companies, they are still at a very nascent stage. It’s a great way to play consumer internet space in India,” he told ETNOW earlier this month.

Ajanta Pharma (up 73 per cent), Mphasis (up 70 per cent), Vodafone Idea (up 68 per cent), Apollo Hospitals (up 65 per cent) and Jubilant FoodWorks (up 65 per cent) are other top midcap gainers of the year. Ajanta Pharma has a consensus ‘outperform’ rating, with three ‘buy’ and four ‘outperform’ recommendation on the publicly available Reuters Eikon database.

In case of Mphasis, strong growth in the direct channel helped further by mining of Blackstone portfolio companies and tailwinds for digital risk business, makes it a fast-growing IT company, Goldman Sachs said in a note.

“Consistently strong deal wins in direct channel should ensure that the strong growth trajectory continues into FY22E/23, whereas for the direct channel (82 per cent of revenues now) we are expecting a strong 20.6 per cent growth in FY22 and 16.3 per cent expansion in FY23. Due to this, we are expecting 15.6 per cent dollar revenue growth for Mphasis in FY22,” the foreign brokerage said.

On Jubilant FoodWorks, Kotak Securities said the company has pushed structural improvements during the pandemic and transformed itself into a leaner execution engine. “This, along with easing of competitive intensity and net cash of Rs 800 crore put Jubilant in a sweet spot. We note that Jubilant forayed into Chinese cuisine in March 2019 under the new fast-casual brand, Hong’s Kitchen. It has scaled up to five stores. Biryani is also a promising cuisine addition to its portfolio,” the brokerage said.

Vodafone Idea’s parent Vodafone Group in September won a decade-long battle against the Indian tax department’s demand of Rs 20,000 crore in retrospective tax.

Apollo Hospitals, too, has a consensus ‘outperform’ rating.

The BSE Midcap index has gained 19 per cent this calendar after falling 3 per cent in 2019 and 13.37 per cent in 2018.





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