The markets have taken quite a deep hit over the past year. Given the current decline of at least 30/40% among major Midcap stocks, we have curated a list of stocks that have seen a major hit due to illiquidity and the global panic across markets with continued fundamental & operational outperformance.
Some of them include the following:
- Balkrishna Industries Ltd. (NS:BLKI) (30% from 900 to 1170) - The company dominates over 6% of the global market share of the tyre market for Agricultural and Earth Moving heavy vehicles. The average OPM is around 25%. To put it in perspective, BKT makes a quarter what Ceat makes in an entire year. Last year this time BKT was valued at 1060/- while it’s currently at 894/-. However, profitability and sales have grown along with more reserves and lower borrowings.
- Nocil Ltd (NS:NOCI) (50% from 140 to 210) - India’s largest chemical company, which holds over 51% market share in rubber tyre chemicals, over the past year the stock prices have slightly corrected but the sales and profit margins have however continued to expand. In a market when auto sales have slowed down and the market stares China ADD threat in its face~ this debt-free company is available at a Forward PE of 11x.
- Cholamandalam Investment and Finance Company Ltd (NS:CHLA) (16% from 1250 to 1460) - Given the assumption that the VoA (interim budget’2019) will get implemented. It would create a strong influx in savings and higher lifestyle expenses in the lives of middle and low-income groups. Cholamandalam (NS:CHLA) Finance is one of the best CV/ 2/3 wheeler finance company now getting into housing finance dominating the markets in II/III tier cities. Over the past year, the stock has seen a 12–15% correction while the fundamentals have steadily improved.
- HeidelbergCement (DE:HEIG) India Ltd (72% from 157 to 270) - Continuing our rationale and betting on the low and middle-income group. This company has a major chunk of the market share across the rural markets in the central Indian belt (viz~ Bihar, Jharkhand & UP). Heidelberg over the past year has seen a slight correction but the debt has substantially reduced leading to a higher operating margin and better profitability. In simple words, a company that trades at a ( 3 year ) average PE of 37x is currently at 157/- trading at 16.63x. If the PE hypothesis holds true and the company should trade at 37x- the target should be close to 349/- (120% upside).
- JK Paper Ltd (NS:JKPA) (50% from 140 to 210) - Over the past few years, our economy has seen an increase in the startup & entrepreneurship environment. Majorly every business has seen an increase in printing & printing paper costs. JK PAPER is the #1 company in the printing paper segment and also the 2nd largest by capacity. Strongly favored by the increase in USD prices and a reduction in debt we are looking at a 50% upside from the current prices of 140/- to a target of 210/-. Moreover statistically speaking each time there are Lok Sabha elections in India, printing papers are in absolute high demands.