13 mid, smallcap stocks expected to report up to 2,800% rise in Q2 profit. Should you buy?

NEW DELHI: With the Q2 earnings season kicking off from this week, analysts expect non-commodity companies to fare better amid a cool-off in key commodity prices. Domestic brokerage Axis Securities said it expects downgrades in sectors like metals, oil & gas while upgrades are expected in the auto, consumers, BFSI and industrials sectors.

While at an aggregate level Nifty earnings is expected to remain flat, analysts remain bullish on select stocks in the broader market that can spring a surprise in Q2 earnings amid strong domestic demand. While Nifty has gained less than 5% so far in 2022, Nifty Midcap has rallied over 9% year-to-date.

Healthcare service provider HCG's Q2 profit after tax (PAT) is expected to increase by a staggering 2,800% to Rs 11.6 crore. "We expect HCG to continue its growth momentum given its oncology play and financial discipline that has improved operational numbers," Edelweiss Securities said.

Smallcap GMDC'S Q2 PAT is expected to increase five times to Rs 201 crore. "Higher realisation (up 97% YoY to INR4,227) should help it to record an EBITDA/tonne of Rs 1,499," the brokerage said.

There are at least five realty stocks whose September quarter profit is expected to grow over 100% - Sunteck Realty, Brigade Enterprises, Godrej Properties and Sobha.

Amid an improvement in housing sales, Edelweiss predicts Godrej Properties' net will jump 1,303% to Rs 500 crore during the quarter. Brigade's PAT is expected to jump eight times. For Sunteck, the estimate stands at 216% and 281% for Sobha.

Speciality chemicals company Galaxy Surfactants and Fine Organics, which are among the top picks for Edelweiss, are likely to enjoy strong margins on improved product mix.

Galaxy's PAT is expected to jump five-fold to Rs 83.7 crore and 3 times for Fine Organics to Rs 170.4 crore.

"With global supply chains continuing to face disruption and many global players facing raw material challenges, FOIL is beneficiary of strong procurement and inventory of raw material helping it meet customer requirements though at elevated prices," the brokerage said.

Among auto companies, Motherson Sumi Systems is expected to report 240% jump in its Q2 profit to Rs 318.4 crore. Despite QoQ drop in revenue, the company's focus on cost control may drive EBITDA growth.

Midcap stock Solar Industries is also expected to double its PAT to Rs 161 crore during the quarter, driven by strong growth from coal india and higher input driven pricing of ammonium nitrate.

Among hotel stocks, Indian Hotels and Lemon Tree are likely to report 3x jump in profits.

"For IHCL, we expect the strong momentum seen in Q1FY23 to continue into Q2FY23 which would help it overcome the seasonality that is usually seen in Q2. With the uptick in corporate travel sustaining in Q2FY23 we build in a 25% growth from pre covid levels," Edelweiss said.

Polyplex Corporation's PAT is expected to more than double to Rs 203 crore. The brokerage estimates revenue to grow 37% YoY and margins to improve >150bps QoQ owing to easing raw material cost.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)