5 midcaps that outperformed in July and could gain more

The BSE MidCap index gained 3.6% in July after falling nearly 16% between the time the index hit a record high in January and June 30. There are some stocks which have gained significantly with valuations turning attractive after the sharp correction in the last few months. ET takes a look at five stocks which outperformed during the month and whose outlook looks bright going ahead:

L&T FINANCE HOLDINGS
CMP (Rs): 175.80
Last 1-month Change (%): 19.71


L&T Finance Holdings’ shares got a boost after the non-banking financial company reported strong result for the quarter ended June and declared its provisioning journey to be complete by allocating additional funds towards stressed assets. The company reported 71% growth in net profit at Rs538 crore for the June quarter. Citigroup in a recent note said it the stock attractive at 2.5 times FY20 estimated price to adjusted book value for a likely return on equity of 20%. Citigroup has a ‘buy’ rating on the stock with a target price of Rs225.

HAVELLS INDIA
CMP (Rs): 634.25
Last 1-month Change (%): 19.13

Havells has also outperformed owing to its strong earnings growth in the June quarter. The company posted a 73.3% year-on-year increase in its June quarter standalone net profit to Rs210.4 crore. “The company is on track to improve its growth and profitability on the back of expanding reach and better product mix...Given strong and expanding product portfolio along with dealer-focused strategies, HAVL (Havells) is poised to grow better than market, once it gathers pace,” said Antique Stock Broking in a recent note. The brokerage, which has a ‘buy’ rating on Havells with a target price of Rs610, sees Havells as one of the best plays on discretionary spend uptick over the medium term.

CANARA BANK
CMP (Rs): 284.45
Last 1-month Change (%): 14.40

Canara Bank also came on the buy radar of investors on the back of strong numbers for the June quarter. The company reported 12% year-on-year rise in net profit at Rs281.5 crore in the first quarter. Quantum Securities has upgraded Canara Bank to ‘accumulate’ from ‘hold’ and revised target price upwards to Rs290 from Rs284. “Canara Bank reported a Q1FY19 net profit of Rs2.8 billion, which was better than our expectations due to better than expected operating performance and benefits from strong recoveries. Though slippages were higher than expected, future guidance on the same remains encouraging,” said Quantum.

GLAXOSMITHKLINE PHARMACEUTICALS
CMP (Rs): 3,178.55
Last 1-month Change (%): 12.83

A 235% year-on-year increase in net profit to Rs88.59 crore for the quarter ended June has helped GSK Pharma surge in the month of July. However, Motilal Oswal sees limited upside in the stock from current levels. The brokerage said GSK Pharma has strong parent company support, superior brand portfolio, high payout ratio and industry-leading return ratio. However, the stock trades at 51 times FY19 estimated earnings and 45 times FY20 estimated earnings, which is at a huge premium to the sector, said Motilal Oswal.

RELIANCE NIPPON LIFE ASSET MANAGEMENT
CMP (Rs): 252.4
Last 1-month Change (%): 11.98

Reliance Nippon’s shares have gained in the last one month as HDFC AMC came out with an IPO which was at a premium valuation to where Nippon was trading at and its quarterly performance was also good, said Gaurav Dua, Head of Research at BNP Paribas-owned Sharekhan.