Top 5 Mid-Cap Stocks at Discount

Mid-cap companies as the name indicate, fall right in the middle, between large and small-cap companies. Mid-cap stocks are the respective shares of the companies that comprise a market capitalization in between ₹ 5,000 Crore to  ₹20,000 Crore. As per SEBI, the listed companies which are ranked from 101 to 250 company in the Indian stock exchanges (NSE & BSE) in the terms of market capitalization are said to be Mid-Cap Stocks. Bharat Electronics, Exide Industries, Bharat Forge, etc. are some of the Mid-cap stocks. Nifty has a benchmark Mid-cap Index in India known as Nifty Midcap 50 which holds the top 50 most traded mid-cap stocks in the market.

The mid-cap stocks at discount are:

1. Piramal Enterprises

The Piramal Enterprise share price has decreased by 53% from its 52-week high of Rs 2084, with the previous close on 20 July' 2023 at Rs 976. The average estimated share price target is Rs 1095, a potential upside of around 12%.

Key Highlights:

I. Strategic Loan Mix: PEL aims to shift loan mix towards retail lending (67% of AUM by FY26) to mitigate cyclicality in the wholesale business.
II. De-risking Wholesale Book: PEL enhanced granularity and provisioned 55% for Stage-3 assets in the wholesale book, with positive developments expected from FY23-24 onwards.
III. Potential Stake Unlocking: PEL holds an 8.34% stake in Shriram Finance, which may be unlocked in the next 12-18 months, providing additional value to shareholders 
IV. Expansion in Retail Business: PEL is expanding unsecured lending by partnering with Fintech and Consumer Tech companies, offering an attractive yield of 18% on advances and a robust ROA of around 5%.

Key Risks: 

Potential risks include slower retail lending growth, delayed resolution in Wholesale 1.0, and unforeseen issues in Wholesale 2.0 despite risk management measures.

Financial Performance:

Robust Balance Sheet: PEL maintains a strong balance sheet with a net worth of ₹ 31,000cr and cash & liquid investments of ₹ 7,430cr as of March 2023.

Outlook:

he company is showing great growth trajectory to cross the current valuation of the stock.

Financial Summary:

2. Gland Pharma

The Gland Pharma share price has decreased by 53% from its 52-week high of ₹ 2606, with the previous close on 20 July' 2023 at ₹ 1237. The average estimated share price target is ₹ 1429, a potential upside of around 16%.

Key Highlights:

I. US Market: GLAND's revenue decline in the US market was attributed to inventory rationalization, high price pressure, and a higher base from COVID-19 related products sales.
II. India Business: Impact on business due to production line shutdown and reduced business from domestic B2C division.
III. RoW Business: Softer off-take in the ROW market and penem production line shutdown as part of capacity expansion.

Key Risks:

I. USFDA inspection outcomes may impact revenue growth.
II. Entry of new players could increase pricing pressure in the injectable portfolio.
III. Delay in launching Biosimilar in the market.

Financial Performance:

I. Revenue declined by 28.8% YoY, with weak performance in the US, India, and RoW markets.
II. Gross margins improved by 300bps, EBITDA margins at 21.5% down 100bps.
III. Reported PAT fell by 72% YoY due to lower sales and low operating profitability.

Outlook:

Expecting similar growth for GLAND in core markets and high single-digit growth in India and RoW over the long term

Financial Summary:

3. Rajesh Exports

The Rajesh Exports share price has decreased by 50% from its 52-week high of ₹ 1028, with the previous close on 20 July' 2023 at ₹ 517. The average estimated share price target is ₹ 1100, a potential upside of around 113%.

Key Highlights:

Rajesh Exports Signed Pact for Lithium-ion Cell Factory:
I. Bengaluru-based Rajesh Exports signs pact with Ministry of Heavy Industries and Karnataka government.
II. The agreement is for setting up a 5 GWh lithium-ion cell factory in Karnataka.
III. The project is part of the ₹  181 billion production-linked incentive (PLI) program for advanced chemistry lithium-ion cells.

Government Support and Incentives:

I. Ministry of Heavy Industries and Karnataka government assure all required support for the Giga Factory.
II. Tailor-made incentive package provided by the state government for the project.

Key Risk:

Dividend pay-out has been low at 2.83% of profits over last 3 year. 

Financial Performance:

I. Company is almost debt free.
II. Company is expected to give good quarter.

Outlook:

The company is the single largest constituent of the gold business. Rajesh Exports aims to foray into advanced technology solutions for clean and green energy storage.

Financial Summary:

4. Aarti Industries

The Aarti Industries share price has decreased by 50% from its 52-week high of ₹ 924, with the previous close on 20 July' 2023 at ₹ 466. The average estimated share price target is ₹ 562, a potential upside of around 21%.

Key Highlights:

I. Established in 1984, Aarti Industries is a global specialty chemical company.
II. Operates in key value chains with a major presence in the US, Europe, and Japan.
III. Holds a top-five global ranking for 75% of its portfolio.
IV. 200+ products sold to 700+ domestic and 400+ export customers in 60 countries.

Key Risk and Financial Performance:

I. Challenging FY23 due to global supply chain disruptions and inflationary pressures.
II. Chemical business EBITDA grew over 2x in the last five yea₹ 
III. Commercialized new facilities and ongoing expansions on track.
IV. Volume growth expected to be robust in FY24 (~25%).
V. EBITDA growth guidance remains unchanged at 25%.
VI. Capex projects to be commissioned in FY24-25 for further capacity expansion.

Outlook:

I. Upcoming capex of₹ 2500-3000 crore to boost specialty chemical revenue growth.
II. Increasing share of value-added business portfolio.
III. Expanding product range with new chemistries and value-added products.

Financial Summary:

5. Adani Power

The Adani Power share price has decreased by 44% from its 52-week high of ₹ 433, with the previous close on 20 July' 2023 at ₹ 244. 

Key Highlights:

I. The project in Mannar and Pooneryn in Sri Lanka's Northern Province will be completed by January 2025.
II. The projects include a 500 MW wind project, development of Colombo Port West Container Terminal, and producing green Hydrogen.
III. The total investment in the projects is nearly $1 billion, showcasing Adani Group's growing footprint in the regional port and energy sector.  The Group previously entered the Colombo Port project as the majority stakeholder after a different development plan was cancelled.

Renewable Energy Cooperation and Development in Sri Lanka:

Sri Lanka and India signed agreements on renewable energy cooperation and development of Trincomalee as an energy hub. A permit for a joint venture between Ceylon Electricity Board & NTPC for a solar park in Sampur, Trincomalee district, was issued.

Key Risk:

I. Company is not paying out dividend
II. Promoters have pledged 25.1% of their holding.

Financial Performance:

I. Company has delivered good profit growth of 48.1% CAGR over last 5 year 
II. Company's working capital requirements have reduced from 103 days to 74.2 days.

Outlook:

I. This company is likely to have a strong quarter. 
II. Over the past 5 year, it has shown impressive profit growth at an average rate of 48.1% annually and expected to maintain.

Financial Summary:

Top 5 Mid-Cap Stocks at Discount:

*Summary(as on 26th July 2023)