These midcap firms posted over 50% growth in Q4; should you invest?

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At the time when India Inc reported robust earnings growth in the March quarter, at least 12 midcap firms from sectors like metal, pharma, healthcare, consumer durables posted over 50% growth in topline as well as bottomline. Market analysts hold a ‘Buy’ rating on some of these stocks.

Q4 results

Data available with Ace Equity showed that Jindal Steel and Power reported 599% growth in net profit at Rs 2,139.29 crore in Q4FY21 on the back of better steel prices and the company’s sales in the export market. Gross sales of JSPL increased by 72.78% YoY to Rs 13,189.78 crore.

It was followed by Page Industries which posted 272.48% growth in net profit on 541% rise in gross sales. Astral, Laurus Labs, Tube Investment of India, Sundram Fasteners, ICICI Securities and Escorts also reported over 100% profit growth on over 50% rise in revenue.

Net profit of other players including Bayer CropScience, Castrol India, Dixon Technologies and Wabco India also increased between 50%-100%. On the other hand, gross sales of these companies advanced between 60%-150%.

Stocks to buy?

While retaining a ‘Buy’ rating on Escorts post Q4 results, Axis Securities said, “Escorts reported a good set of numbers in Q4FY21 and stood marginally above our estimates.” It has set a target price of Rs 1,350 for Escorts. “We remain optimistic on the exports segment as it remains a promising opportunity, especially with Kubota alliance. With the economy normalising from the second half, we expect the Railway segment and construction equipment segment activity to pick up across the country,” the brokerage said.

On the other hand, Geojit Financial Services has an ‘Accumulate’ rating on Wabco with a target price of Rs 7,909. The company is a leading supplier of technologies and services that improve the safety, efficiency and connectivity of commercial vehicles (CV) in India.

Given the strong fundamentals and potential merger Geojit Financial Services believe Wabco will be a direct beneficiary, in the long run, owing to economic growth, wider portfolio and governments thrust on infrastructure development.

“Considering the near term margin pressure due to higher material and logistics cost, we recommend Accumulate rating for long term earning visibility,” Geojit said in a report.