Midcap stocks to buy: GAIL, Lemon Tree Hotels, Varun Beverages among 12 stocks that can rise 14-37% in the next one year

Midcap stocks to buy: In recent times, the midcap segment of the market has faced significant pressure, primarily due to concerns regarding elevated valuations without any fresh triggers to drive positive momentum. Indian stock market benchmark Nifty 50 has managed to eke out a modest gain of approximately one per cent for the current month. Conversely, the Nifty Midcap 100 index has experienced a slight decline of around half a per cent over the same period.

The midcap space may remain volatile in the near term. Nevertheless, several experts believe there are plenty of stock-specific opportunities in the midcap space.

"Midcaps have again become the segment of activity, particularly by retail investors. This is because there is no institutional selling pressure in midcaps unlike in large-caps where institutions including FIIs have large holdings," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

According to Manish Chowdhury, head of research at StoxBox, one should look at the mid-cap companies demonstrating robust revenue visibility and sustained growth momentum in their margins.

"We prefer those companies with lower leverage, indicating a healthier balance sheet and reduced financial risk. Despite the challenges in predicting short-term trends, we maintain confidence in the long-term potential of selective mid-cap companies," Chowdhury said.

Based on the recommendations of several analysts, here are 12 midcap stocks that can rise 14-37% in the next one year. Take a look:

Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Limited

GAIL (India) | LTP: ₹180.50 | Target price: ₹215 | Upside potential: 19%

GAIL is entailing a 4.3tpd green hydrogen project, which is key to achieving decarbonization objectives and a long-term target of 20 per cent hydrogen blending in natural gas. 

Management believes a small-scale LNG project (SSLNG), which is in the pilot phase would be instrumental in improving LNG availability in underpenetrated areas. 

"We are positive on GAIL as the capex cycle unwinds. We expect a 14 per cent EBITDA CAGR over FY24-26E driven by rising natural gas transmission volume and improvement in the petrochemical segment. With a 2 per cent dividend yield, it is an attractive play," said the analyst.

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Lemon Tree Hotels | LTP: ₹132.40 | Target price: ₹170 | Upside potential: 28%

The analyst expects the strong momentum to continue going forward, led by a further improvement in occupancy and ARR, on the back of a resilient demand scenario, an increase in ARR with the addition of Aurika MIAL and room renovations, and a strong addition of hotel under management contracts. 

Management expects mid-teen ARR growth with an occupancy rate of over 70 per cent in FY25. 

"We expect Lemon Tree to deliver revenue, EBITDA and adjusted PAT CAGR of 22 per cent, 22 per cent and 40 per cent, respectively, over FY23-26 and RoCE to improve to 17.3 per cent by FY26 from 9.4 per cent in FY23," said the analyst.

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Varun Beverages | LTP: ₹1,401.70 | Target price: ₹1,600 | Upside potential: 14%

Varun Beverages has adopted a multi-pronged strategy for the calendar year 2024 (CY24) to sustain growth momentum - focusing on enhancing manufacturing capability, augmenting distribution, and geographical reach. 

Within the export market, Varun Beverages has signed an exclusive agreement to manufacture and package Cheetos in Morocco to tap into the snack food market. 

Along with the above agreement, the recent BevCo acquisition aligns perfectly with Varun Beverages’ strategic goals of enhancing its presence in the African snacks and beverage market.

"We expect 21 per cent, 22 per cent and 28 per cent revenue, EBITDA and PAT CAGR over CY23-26," said the analyst.

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Kaynes Technology India | LTP: ₹2,819.60 | Target price: ₹3,300 | Upside potential: 17%

Kaynes Technology has formed a manufacturing alliance for producing a clear glass lens through a technology partnership with an emerging disruptor in this domain. 

Management has reaffirmed its revenue guidance of nearly ₹17-18 billion in FY24 and a double-digit PAT margin.

"We estimate a CAGR of 43 per cent, 46 per cent, and 57 per cent in revenue, EBITDA, and adjusted PAT, respectively, over FY23- FY26, driven by a healthy order book growth trajectory (32 per cent CAGR) and a better margin profile (increasing mix of high-value order)," said the analyst.

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360 ONE WAM | LTP: ₹650.30 | Target price: ₹850 | Upside potential: 31%

360 ONE WAM is well-placed to maintain its leadership position in the wealth management business, supported by a track record of innovative product offerings. 

The management’s decision to venture into new domestic geographies and target the HNI category besides global markets is likely to spur the next leg of growth and have a positive impact on the topline from FY25 onwards. 

"We expect 360 ONE to register an ARR AUM CAGR of 23 per cent over FY24-26 and earnings CAGR of 20 per cent," said the analyst.

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Manish Chowdhury, Head of Research, StoxBox

Mahindra Lifespace Developers | LTP: ₹553.30 | Upside potential: 25%

Mahindra Lifespace's recent launch of Kandivali Phase-1 has surpassed expectations, with pre-sales exceeding ₹800 crore, marking a pivotal moment for the company. 

This achievement lays the foundation for substantial value creation in the foreseeable future. 

Looking ahead, Mahindra Lifespace aims to elevate its gross development value (GDV) from ₹15,000 crore to ₹45,000 crore within the next five years. 

The company's strategic focus on lucrative micro markets and premium segments positions it for significant growth. 

Under the adept leadership of Anish Shah, Mahindra Lifespace has emerged as a growth gem within the Mahindra Group. 

The envisioned trajectory includes a target of growing revenue by five times over the next five to seven years, indicating a clear path toward expansion and enhanced profitability. 

“In terms of market valuation, reputed real estate companies like Mahindra Lifespace are typically valued at five times EV/sales by us, signalling a substantial upside potential of around 25 per cent for the company from the current price,” said the analyst.

Shakti Pumps (India) | LTP: ₹1,334.15 | Upside potential: 26%

Shakti Pumps (India) as it is expected over 69,000 pumps are expected to be installed over the next two-year period and healthy revenue guidance coupled with stable quarterly performance, the top line and order book of the company looks promising for the coming period ensuring robust growth for the company. 

Under the PM KUSUM Scheme, over 35 Lakh solar pumps will be installed until FY28. The average price of installing a solar pump is around Rs. 3 Lakh, so the total market opportunity stands at ₹1,050 billion. Therefore, being a market leader in the industry, Shakti Pumps India is poised to benefit from such a scheme over the years. 

Considering the long-term scenario, the high energy targets set by the government coupled with the ease of installation of the company’s products, are expected to drive the market going ahead. 

These factors coupled with volatile fuel prices associated with fuel-based pumping systems are about to create ample opportunities for solar-based pumping systems. 

“The current macro situation, a healthy order book, and rising government support towards the sector make us constructive on the company and assign a buy rating that has arrived at a 26 per cent upside from the current price,” said the analyst.

Deepika Murarka, research analyst at Choice Equity Broking

Happiest Minds Technologies | LTP: ₹765.55 | Target price: ₹945 | Upside potential: 23%

The environment continues to see softness, however, meaningful opportunities of size and scale still exist in areas of cloud migration, core modernisation, digital transformation, cybersecurity, analytics, and AI. 

Happiest Minds is well-positioned to tap into these opportunities by building capabilities ahead of time and through its consulting-led approach. 

"We expect revenue, EBIT and PAT to grow at a CAGR of 17.6 per cent, 17.6 per cent and 20.3 per cent respectively over FY23-FY26E. The target price of ₹945 implies a PE of 43 times (modified) on FY26E EPS of ₹22," said the analyst.

The Ramco Cement | LTP: ₹808.90 | Target price: ₹1,000 | Upside potential: 24%

The current need for cement is strong, fuelled by both the individual home-building sector and infrastructure segments. The cement industry is expected to grow with a CAGR of 6-8 per cent. 

The foreseeable future indicates a sustained surge in cement demand, driven by the government's emphasis on infrastructure spending and upcoming elections. 

Management has offered projections, anticipating volumes to reach nearly 17.5mnt for FY24E and around 19-20mnt for FY25E. The company is also directing its attention to capital expenditure plans as part of an effort to enhance its market presence. 

"We expect revenue and EBITDA to grow at a CAGR of 12.1 per cent and 23.1 per cent respectively over FY23-FY26E. Our target EV/EBITDA multiple is 13 times on FY26E EBITDA with a target price of ₹1,000," said the analyst.

Sansera Engineering | LTP: ₹1,006.85 | Target price: ₹1,200 | Upside potential: 19%

Given the industry's shift towards higher CC segments from lower CC two-wheelers and the integration of more premium components with lightweight materials, the automotive industry is poised to register healthy growth moving forward. Sansera Engineering is transforming from an automotive to a non-automotive and xEV-agnostic products supplier by its ability to adapt to these changes.

"In the medium to long term, we anticipate substantial revenue growth for Sansera Engineering driven by (1) an increasing proportion of revenue generated by the non-automotive segment, (2) securing new orders for engine-agnostic components, (3) an increase in the share of aluminium components, and (4) a revival in the export business, which will contribute to margin expansion in the coming quarters," said the analyst.

"We introduce FY26 and roll forward our valuation to Sep-25. We expect revenue, EBITDA and PAT to grow at a CAGR of 16 per cent, 21 per cent and 29 per cent, respectively, over FY23-26E and value the stock based on 22 times Sep-25E EPS and arrive at the target price of ₹1,200," the analyst said.

Concord Biotech | LTP: ₹1,497.30 | Target price: ₹1,715 | Upside potential: 15%

"We like Concord Biotech due to (1) fermentation APIs gaining market share with an expansion of API portfolio in the low-volume high-value segment, (2) the formulations segment picking up on the back of new launches and the addition of injectables portfolio, (3) ready capacities and low utilisation levels providing opportunities for operating leverage and margin expansion, and (4) the completion of significant capex to result in FCFF generation," said the analyst.

"We estimate FY23-26E revenue, EBITDA and PAT CAGR of 21.4 per cent, 26 per cent and 27.5 per cent respectively. We value the stock at 36 times FY26E EPS to reach a target price of ₹1,715," said the analyst.

Piramal Pharma | LTP: ₹118.70 | Target price: ₹162 | Upside potential: 37%

"We remain optimistic about Piramal Pharma due to the following levers: (1) momentum in order inflows in CDMO and sustained growth in other two segments to drive top-line CAGR of 13.1 per cent between FY23-26E, (2) the gross and operating margin improvement will lead to EBITDA CAGR of 43.9 per cent between FY23-26E, (3) the higher operating profits will help in reduction of net debt and thereby reduce the finance cost," said the analyst.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.