There is more potential for midcap stocks in the latest roller coaster tone of markets, and Centrum has given a buy rating on three stocks in the retail segment. These companies catering largely to the urban population and operating in mid-premium segment are likely to outperform their peers.

Despite the current volatility shocks due to macroeconomic conditions, midcap stocks have performed better compared to the benchmark Sensex in the broader market. In the past three months, on BSE, where Sensex climbed by more than 5%, the Midcap index has jumped by nearly 9%. There is more potential for midcap stocks in the latest roller coaster tone of markets, and Centrum has given a buy rating on three stocks in the retail segment. These companies catering largely to the urban population and operating in mid-premium segment are likely to outperform their peers.

In a report, Akhil Parekh Research analysts, and Kevin Shah Research Associate at Centrum are optimistic in 3 stocks in the midcap basket.

In their Q2FY23 preview report for midcaps, the analysts said, "from our retail universe we expect companies catering largely to the urban population and operating in mid premium segment to outperform its peers. Metro Brands, Trent and Page are expected to register healthy YoY growth as the impact of inflation on the target consumer audience of these companies is least as of now. Also, the strong brand strength has allowed these companies to pass on the RM inflation with relative ease during last year."

Further, the analysts note added, "From our building materials universe we expect PVC pipes manufacturers such as Supreme Industries to expect to continue feeling margin pressure in the second quarter. We estimate bottoming out of margins for PVC pipes players in the quarter before it starts recovering in 3Q. Cera Sanitaryware in building materials space is expected to perform relatively better compared to pipes, tiles and wood panel sectors as per our channel checks."

In their midcap miscellaneous coverage, the analysts expect CCL Products and La Opala to register healthy YoY growth.

According to the Centrum analysts, expect CCL to report robust YoY growth (flattish QoQ). Volume and price trend remains strong on a YoY basis. They also expect margins to improve sequentially for CCL Products as the higher coffee prices gets fully reflected in sales.

Apart from this, the analysts expect La Opala to have healthy quarter. Demand during Onam and Durga Puja is expected to boost the sales growth in 2Q and 3Q as per the feedback that we have received. EBITDA margins however, may decline sequentially as the new facility of opalware has commenced recently and it will take time for the cost to get fully absorbed.

Additionally, they also expect Mold‐Tek Packaging from the universe  to register more than 15% growth led by strong demand in the paints segment.

Following the above, Centrum has given buy ratings on four stocks. These are:

Page Industries: Centrum gives a buy with a target price of ₹ 59,775 apiece.

CCL Products: Buy a rating with a target price of ₹ 525 apiece.

La Opala: Buy a rating with a target price of ₹ 442 apiece.

On Tuesday, Page Industries shares ended at ₹ 51,438.15 apiece down by 1.85%, while CCL Products shares closed at ₹ 484.80 apiece lower by 2.5%, and La Opala shares finished at ₹ 357 apiece below 1.27% on BSE. The latest downfall in these stocks makes them affordable.

Download the Mint app and read premium stories

Log in to our website to save your bookmarks. It'll just take a moment.

You are just one step away from creating your watchlist!

Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.

Your session has expired, please login again.

You are now subscribed to our newsletters. In case you can’t find any email from our side, please check the spam folder.

This is a subscriber only feature Subscribe Now to get daily updates on WhatsApp