Two Midcap Stocks for Long Term Investment

The BSE Midcap index returned 26.53% on a year-to-date basis, whereas it was up 66.25% last year. The previous three months delivered 14.3%, and it was up 2.1% in a month’s time frame. Thoroughly scrutinized mid-cap stocks have the power to change investors’ fortunes. We have scanned the mid-cap space and came up with two scrips that have the potential to create investors’ wealth over the long term.

 

Orient Electric Ltd (NS: ONTE )

Erstwhile Calcutta Electrical Company, Orient Electric became part of the 150-year old CK Birla group in 1954. The company manufactures fans, lighting, home appliances, switchgear, and other electrical solutions. Orient is the largest manufacturer and exporter of fans in India. Since 2018-19, the company partnered with De’Longhi group, which ensured gateway to premium brands of De’Longhi, Kenwood & Braun into India. Orient demerged its cement and consumer appliances business from Orient Papers. Orient Electric got listed in May 2018 post its demerger from Orient papers. Over the last few quarters, Orient Electric has increased its focus more on the niche products range and putting higher thrust on innovations. With the launch of new and premium products over the last few years, the company has successfully managed to remain ahead of the stiff competition in the electrical appliances space.

Orient Electric’s revenue CAGR for the last four years was 7.7%. While the Electric Consumer Durable segment’s revenue CAGR was 7.5%, the Lighting and Switchgear vertical posted an 8.4% CAGR. Revival of real estate augurs well for its Electric Consumer Durable business. Its operating EBITDA CAGR was 17.5% during the same period. Notably, despite pandemic-induced lockdowns, its operating EBITDA jumped 24.4% in FY2021 compared to its previous fiscal. Profit after tax CAGR for four years was a decent 23.7%. The company’s return on capital employed grew 1180 basis points to 38.7% in FY2021 from 26.9% in FY2018. For the year ended March 2021, Orient’s debt-equity ratio was a meager 0.03:1. The scrip returned around 90% to investors in a year and trading very close to its 52-week high.   

 

Hatsun Agro Product Ltd (NS: HAPL )

Hatsun Agro Product traces its root to 50-year old Arun ice cream. The company is engaged in milk and milk products, cattle feed, and fast foods. Hatsun is among the top players in the space in southern India. Milk and milk products constitute roughly 94% of the company’s total revenue in FY2021. While milk contributes 65% to revenue, the remaining 35% comes from value-added milk products. Hatsun’s branded liquid milk revenue growth is in line with market expectations. In FY2021, the company has expanded its geographical reach by opening a dairy plant in Maharashtra’s Solapur and paneer manufacturing facilities in Tamilnadu. It is in expansion mode, as is seen from its capital expenditure cycle. The board of directors has approved increasing its borrowing limit from Rs 1,500 crore to Rs 1,800 crore.

In Q1FY2022, Hatsun Agro posted a 20.8% year-on-year revenue growth to Rs 1546.2 crore from Rs 1,280.7 crore in Q1FY2021. Its net income jumped 4% during the same period. Notably, the company’s other than milk and milk products revenue jumped 27.6% in the quarter ended June 30, 2021, compared with the corresponding period last year. Expansion of existing product portfolio, gradual unlocking of economy, easing of supply chains and consumers’ shift from unorganized to organized milk and milk products should drive Hatsun’s top-line growth placing the stock as a long-term bet. The stock fetched an 85.4% yield to shareholders in a year and trading at an 8.7% discount to its 52-week high of Rs 1035.      

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