Saurabh Mukherjea picks 3 new small and midcap stocks, exits Tata Elxsi

Dalal Street's top stock picker Saurabh Mukherjea, who runs Marcellus PMS firm, has added smallcap stock CMS Info Systems and two new midcaps - Coforge and Escorts Kubota - while exiting Tata Elxsi from his Rising Giants fund.

The midcap-focused fund has underperformed BSE500 TRI across one-month, 6-months and one-year time periods. "We continue to make suitable changes in the portfolio to create more diversity and bring the healthy earnings growth trajectory back in the portfolios," Mukherjea told clients in a note.

CMS Info Systems

On the back of its scale and a strong balance sheet (net cash company with healthy return ratios), Marcellus said CMS Info is well placed to benefit from healthy ATM rollouts (capex heavy), increased outsourcing activity of support functions by banks and tightening regulatory compliance.

Stronger growth in the RMS segment and diversification into bullion-logistics and loan collections will drive revenue growth & diversification of revenues, it said.

The company's shares are up around 51% so far in the calendar year.

Coforge

Tier-2 IT company Coforge has seen a rise in its average deal TCV and the number of large deals following the appointment of a new CEO.

"Coforge now offers 16 service lines and is close to being an end-to-end service provider. To foster a performance-based culture, increment ranges for the delivery organization were tripled. Resultantly, Coforge had an industry-leading average attrition rate of just 13% between FY18 and FY24," Mukerhjea said.

Escorts Kubota

With Kubota now controlling majority of the stake, Marcellus believes that Escorts is at the cusp of gaining market share in the tractor industry.

"Apart from the domestic market, Kubota intends to make India an export hub and export tractors to Africa, US and Europe markets. Driven by market share gains and consequent operating leverage driven margin improvement, we expect the company to deliver healthy earnings growth over the next 5 years," the PMS firm said.

Tata Elxsi

Marcellus exited Tata Elxsi last month saying that the decision was based on better IRR expectations from new entrants. The stock has lost about 21% of its value year-to-date.

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