Since January 2018, when the sell-off in mid- and small-cap stocks began, price targets of most stocks have seen downgrades with sentiment souring. With their valuations way cheaper than most bluechips and the government’s renewed focus on economic growth expected to benefit a wider range of corporates, analysts are now increasing price targets on shares of smaller companies more aggressively. Majority of the upgrades have happened in shares of companies in the construction and infrastructure space.
For instance, analysts have raised their price target on NCC by 67% in the past two months to Rs 109 against the current price of Rs 93 amid a strong order book position, expected pick-up in execution, stable margins, debt reduction and improvement in the working capital cycle.
Mid- and small-cap shares are seeing their best phase since January 2018. So far in 2021, NSE’s Midcap100 index and Small-cap 100 index have risen 18% and 20%, respectively, as against the Nifty’s gains of 8%.
KNR Constructions, JK Lakshmi Cement and Timken India have seen more than 40% jump in price target since the beginning of the year.
Analysts are bullish on KNR Constructions due to pick-up in road project execution while JK Lakshmi Cement saw significant upgrades after better-than-expected December 2020 quarter numbers driven by strong volume push supported by realization gains.
Timken India is the other stock analysts are bullish on as they see strong demand inflection across company’s key product segments, including cyclical upturn in domestic commercial vehicles demand, over the next three years led by improving economic growth, higher infrastructure spending, mobilisation of construction projects and mining activities.
Suven Pharmaceuticals is the only pharma stock, which has seen significant upgrades in its target price.
