Midcap index nears record high; Varun Beverages, Cummins climb new peaks

The midcap index hit an intra-day high of 26,705.56, was less than 2% away from its record high level of 27,246.34, touched on October 19, 2021.

Shares of midcap companies were on a roll with the S&P BSE Midcap index hitting 19-month high in Friday’s intra-day trade after the companies reported strong earnings. Varun Beverages, Cummins India, Tata Elxsi and Sona BLW Precision Forgings from the index have rallied in the range of 3 per cent to 8 per cent.

At 10:41 AM; the S&P BSE Midcap index was up 0.35 per cent, as compared to 0.38 per cent rise in the S&P BSE Sensex and S&P BSE Smallcap index. The midcap index hit an intra-day high of 26,705.56, was less than 2 per cent away from its record high level. The index had hit an all-time high of 27,246.34 on October 19, 2021.

Among the individual stocks, Varun Beverages (VBL) hit a new high of Rs 1,747.15, and rallied nearly 8 per cent on the BSE. In past one month, the stock has surged 21 per cent on the back of a strong 2022-23 January-March quarter (Q1CY23) performance, robust outlook, and revision in profit estimates.

While traction in star performer Sting continues, VBL is committing capital to future growth drivers [value-added dairy, juice and sports drink]. With improved affordability, VBL remains confident about demand for new products and plans improving supply by leveraging its two new manufacturing capacities in CY24 and its existing distribution/visi-cooler network, analysts at Emkay Global Financial Services said. The stock however, was trading above brokerage firm’s target price of Rs 1,700 per share.

Cummins India too hit a record high of Rs 1,736.75, up 5 per cent on the BSE after the firm reported strong revenue growth of 29 per cent and EBITDA margins expansion of 309bps YoY to 16.9 per cent (partly due to prudent cost management).

Cummins India witnessing strong pre-buying traction, ahead of implementation of CPCB-IV norms from 1st Jul’23. Domestic demand remains strong from segments such as Data Center, Infrastructure, Hospitality, Hotels and Manufacturing.

While on exports front management expects to continue its steady growth driven by new product launches and upgrading existing product across geographies. However, despite strong demand scenario, management has refrained from giving the guidance for FY24, owing to uncertainty arising from supply chain constraint and implementation of CPCB-IV norms (~80% of domestic Powergen business falls under CPCB-IV norms), analysts at Prabhudas Lilladher said.

The brokerage firm remains positive on Cummins given product readiness for CPCB-IV norms, continued momentum in exports market and technology driven product launch (3.0 - fit to market product in exports market). It maintain Accumulate rating on stock with revised target price of Rs 1,750 (Rs 1,708 earlier), valuing it at PE of 35x FY25E (same as earlier).

ABB India, Balkrishna Industries, CG Power and Industrial Solutions, Exide Industries, IDFC First Bank, L&T Finance Holdings, Persistent Systems and TVS Motor Company are among others from midcap index hitting their respective 52-week highs or multi-year highs on the BSE in intra-day trade today.