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JM Financial Midcap Value Picks July 2017

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Dated: July 9, 2017

Script Name Weight CMP Stock Rationale
Federal Bank (FEDERALBNK) (500469) 17.5% Rs 116 Profits are expected to compound in excess 30% over FY17-19 on the back of strong loan growth and moderation in opex & credit costs. ROE is expected to inch towards the ~15% mark in the long run from sub 10% observed in FY16/17.
Manappuram Finance Limited (MANAPPURAM) (531213) (INE522D01027) 14.3% Rs 102 Robust loan growth, improvement in NIMs and a fall in cost/income ratio should result in strong expansion and stabilization of ROE to over 20% levels from FY18 onwards. Manappuram’s profits are expected to deliver growth exceeding ~20% CAGR over FY17-19.
Dilip Buildcon Limited (DBL) (540047) (INE917M01012) 18.7% Rs 477 We expect DBL’s PAT to grow at over 30% CAGR in coming years along with maintaining healthy return ratios (ROE of 18-20%)
Granules India Limited (GRANULES) (532482) (INE101D01020) 14.1% Rs 141 Granules is expected to compound its profits in excess of 25% CAGR in coming years along with sustainable ROE of ~20% on the back of rising contribution from high margin segments like US OTC, prescription and Omnichem JV. Sales mix from these segments would increase from ½ of total sales in FY17 to ¾ of total sales by FY20.
Voltamp Transformers Limited (VOLTAMP) (532757) (INE540H01012) 16.6% Rs 1260 Voltamp has Rs 300 crore of liquid investment and zero debt that reflects strong balance sheet of the company.
Cash 18.9%

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