3 Stocks Poised for a Takeoff

The Indian manufacturing industry is slowly coming out of the pandemic blues. As the situation is easing out, all the sub-sectors are gearing up for faster recoveries. We have selected three stocks with good potential in the short to medium term. Out of these three stocks, one is midcap, and the other two are smallcapped stocks.

1. ELGI Equipments Ltd (NS:ELGE)

ELGI equipment is a manufacturer of air compressors and automobile service station equipment. The company has a global presence and is in the business for the last 60 years. Its products have applications across various industries like food processing, pharmaceutical, agriculture, etc. ELGI has a diversified product portfolio with a presence in over 120 countries. It is expanding in new geographies of Europe. The company is strategically targeting a few countries as the margins are high as compared to India in these countries.

The company has reported robust financials for Q1FY2022. Its net sales at Rs 489.44 crore were up by 71.06% from Rs 286.13 crore in Q1FY2021. Net profit was up by a whopping 237.65%, from Rs 8.73 crore to Rs 12.02 crore. Over the last five years, its revenue grew at 6.67% CAGR against an industry average of 2.27%. The net income CAGR stood at 15.01%, whereas the industry's CAGR was 4.65% during the same period. FIIs have marginally increased their holding in the June 2021 quarter. The stock jumped 143% in a year and 21.6% in six months. Presently it trades at a 15.1% discount to its 52-week high of Rs 243.0.

2. Action Construction Equipment Ltd (NS:ACEL)

Action Construction Equipment is a leading manufacturer of construction and material handling equipment. It has the largest market share in the mobile crane and tower crane segment in India. The company operates in the agricultural, construction, road construction, and earth moving equipment sector. The current Covid-19 scenario has pushed the warehousing activities across India. It has created an excellent demand for loader equipment machinery. ACE has targeted a 50% market share in the next few years. The government's push to the infrastructure sector will positively impact mobile cranes demand and the construction equipment.

The company has reported net sales of Rs 321.5 crore in Q1FY2022, up a mind-blowing 218.42% compared to Rs 100.97 crore for the corresponding quarter of the previous fiscal. Net profit increased by 550.19% from Rs 4.29 crore to Rs 19.31 crore during the same period. Its net income CAGR was an astonishing 51.81% for five years against an industry average of 29.74%. Revenue CAGR during the same period was 13.94%.

3. Timken India Ltd (NS:TIMK)

Timken India is a subsidiary of a US-based Timken company. The company is manufacturing tapered roller bearing components and accessories for the automotive and railway industry. It also serves other sectors such as aerospace, construction, and mining. The railway is going through a modernization phase and converting conventional coaches into LHB coaches and metro rail projects across many cities will act as a catalyst for the company's growth. The growing demand in the CV segment will have a positive impact on the sales of the company.

In Q4FY2021, Timken reported a total standalone income of Rs 483.22 crore, up 25.4% from its previous quarter's total revenue of Rs 385.85 crore. Its net profit CAGR for three years ended FY2021 was a decent 15.9%. The share is currently trading at Rs 1485.95 in NSE. Although the stock trades at a 10.4% discount to its 52-week high of Rs 1,667, it delivered 45.6% returns in a year and 8.5% in six months.