Jefferies’ Top India Mid-Cap Bets For 2021
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Jefferies’ Top India Mid-Cap Bets For 2021

Global research firm Jefferies recommended a ‘buy’ on select Indian mid caps in the new year as the gauge for such stocks rebounded twofold from its lowest in March 2020 to hit a record high.

“Despite Covid-19 disruption, most coverage mid caps recovered in the second half of the calendar year 2020, led by better profitability. In 2021, we foresee sharp growth rebound driven by [product] optimising mix, premium launches, B2C traction, government initiatives, rural penetration and strong balance sheet,” Jefferies said in a note.

Dixon Technologies (India) Ltd., Crompton Greaves Consumer Electricals Ltd., Supreme Industries Ltd., Kajaria Ceramics Ltd., Havells India Ltd., V-Guard Industries Ltd., Finolex Cables Ltd., Finolex Industries Ltd., UPL Ltd., Graphite India Ltd., and HEG Ltd. are the top bets, it said.

There, however, are some risks.

“Re-lockdowns if any, could impact business resumption. Commodity volatility is a key monitorable for electricals and pipes as a sudden sharp dip could result in inventory losses,” Jefferies India analyst Sonali Salgaonkar said in the note.

Jefferies’ rationale for the stock picks:

Crompton Greaves Consumer Electricals

  • Expects earnings to grow at 20% CAGR
  • New launches, product mix optimisation, improved scale and cost rationalisation initiatives can drive 100 basis points upside in operating margins over FY21-23
  • Sees overall top line growth CAGR of 13%
  • Strong balance sheet and good return ratios to aid navigating current disruption
  • Strengthening of reach with go-to-market strategy
  • Utilisation of sizeable cash pile for tapping growth opportunities

Dixon Technologies

  • Estimates sales and profit after tax to register 38% and 46% CAGR, respectively, over FY20-23
  • Sturdy industry opportunity, upside from the government’s production-linked incentive scheme, new launches and client expansion
  • Expects consumer electronic sales to grow at 14% CAGR over FY20-23
  • Initiatives to boost local production in India and curb on imports on LED TVs
  • Strong balance sheet

Finolex Cables

  • Faster traction in new products
  • Capitalising on established dealer network
  • Revival in volumes from auto cables & wires
  • Sees revenue from new products to grow higher than 14%
  • Expects overall revenue/earnings CAGR of 4% and 5%, respectively, over FY20-23
  • Thrust on housing and rural electrification
  • Utilisation of existing cash pile for tapping growth opportunities

Finolex Industries

  • Expects overall revenue and EPS CAGR of 9% and 14%, respectively, over FY20-23
  • Assumed operating margin expansion to 17% by FY23, led by optimising product mix
  • Higher traction in volumes, realisation in pipes and fittings, along with PVC resin an upside scenario
  • Backward integration into PVR resin alleviates dependence on imports
  • Improvement in capacity utilisation to result in better operating leverage

Havells India

  • Bullish on the diversified slate, improving mix, premium launches, work from home tailwind in appliances, market share gains and multiple initiatives to improve reach
  • Mix optimisation, in-house manufacturing in Lloyd and new launches to drive about 170 basis points upside in operating margins over FY21-23
  • Strong balance sheet and good return ratios
  • Entrenched reach and strong brand
  • At an inflexion point with Lloyd set to drive the next leg of growth

Graphite India

  • Share of EAF (electric arc furnace) route of steel production to rise, benefiting electrode industry over the medium term
  • Undemanding valuations
  • Strong balance sheet marked by minimal debt and sizeable cash balance and investments
  • Electrode realisations, needle coke prices and utilisation rates remain a key monitorable


  • Expanding current capacity by 20,000 MT, set to commission by first quarter of 2022
  • Inexpensive valuations
  • Strong balance sheet with minimal debt
  • Needle coke prices and utilisation rates remain a key monitorable

Kajaria Ceramics

  • Sees consolidated revenue CAGR of 6-7% over FY20-23
  • EPS estimated to register 12% CAGR over FY20-23
  • Strong play for housing revival theme
  • Exports by Morbi players can help sustain pricing stability in domestic tiles market
  • Market leader in organised tiles can help gain traction ahead of peers
  • Higher traction in new products — sanitaryware and faucets

Supreme Industries

  • Remains bullish due to sturdy industry opportunity, enhanced value-added mix, new launches, higher operating leverage with volume traction
  • Revival in volumes from construction and infrastructure augurs well for pipes, packaging and industrial segments
  • Diversified product slate assuages concentration risk
  • Expansive distribution acts as a strong moat
  • Improving capacity utilisation to aid operating leverage
  • See sales and EPS CAGR of 10% and 18%, respectively, over FY20-23


  • Full impact of Arysta acquisition from FY20
  • Expects Ebitda margin improving by about 140 basis points over FY20-23, led by optimising product mix and synergies from Arysta
  • Long-term revenue growth ambition of 7-10%
  • Diversified across products and regions alleviates risks
  • Product registrations a strong moat given high-entry barriers
  • Regaining high volume growth and pricing power globally a key catalyst

V-Guard Industries

  • The long-term business outlook remains robust
  • Confident of 15% sales growth in long-term driven by expansion into non-South markets and introduction of new product categories
  • Successful geographical diversification to open new markets as well as de-risk business concentration
  • The asset-light model enables the company to optimise capex and working capital
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