The Top 5 Midcap Stocks You Can't Afford to Ignore in 2023

Midcap stocks are well-known for their growth potential, but what happens when they surpass their full year profits before the year is even over?

It's not just a rare occurrence, but a testament to the strength and resilience of these companies.

In the current economic landscape, select midcap companies have defied the odds and reported impressive net profits in just the first 9 months of FY23.

Today, we take a look at five such midcap stocks which have clocked the highest net profits in many years, even when there's still a quarter to go.

#1 Varun Beverages

First on the list is Varun Beverages.

The company is one of the largest PepsiCo franchisees outside of the United States.

It produces and sells a wide range of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs).

The company's net profit stood at Rs 7,461 million (m) for the year ended December 2021. (Varun Beverages follows the December ending reporting).

Earlier this week, the company reported its earnings for the December 2022 quarter where consolidated net profit came in at Rs 815 m.

Prior to this, the combined net profit of Varun Beverages for the first three quarters had already surpassed previous financial year's net profit.

So, this year's profit increased 108% to Rs 15,501 m in current year.

This was on the back of strong growth in revenues, and transition to a lower tax rate in India.

In the past one year, Varun Beverages share price has rallied over 100%.

The company was listed in 2016 when its financials?were questionable with a couple of years of losses along with mounting debt.

But all that's in the past. Market experts are now still bullish on the company as it is well placed to capitalize on its capacity expansion plans and tap unpenetrated regions for market share gains.

One big concern is competition, which has heated up post Reliance's acquisition of Campa Cola. There are many branded players too, which are doing the same thing as Varun Beverages.

#2 TVS Motor Company

Next on the list is TVS group company TVS Motors.

TVS Motor Company is the third largest two-wheeler manufacturer in India.

It has an annual sale of more than 3 million units and an annual capacity of over 4.95 million vehicles. TVS Motor is also the 2nd largest exporter in India with exports to over 60 countries.

The company manufactures the largest range of 2-wheelers, starting from mopeds, to scooters, commuter motorcycles to racing inspired bikes. More than 44 million + customers have bought a TVS product to date.

The company's net profit stood at Rs 7,568 million (m) for the year ended March 2022.

For this year's first three quarters combined, the company's net profit has already surged FY22's net profit. What's more, the management has guided for a strong fourth quarter.

The net profit for first three quarters stands at Rs 10,808 m.

TVS Motor Company is one of the companies betting big time on Indian EV supply chain. With all this focus on EVs, it should come as no surprise that markets have factored in the positives and sent the stock upward.

Going forward, the company has plans for a 'product offensive' strategy and expects a strong growth story on the export front this year, fueled by growing demand for products as also due to operations in diverse geographies.

The electric two-wheeler industry is slated to grow rapidly and TVS has robust plans for this segment. The company will be launching a series of new products focusing on different customer segments.

The company expects the association with BMW to grow multi-fold in the coming years. TVS and BMW are also working on electric two-wheelers in the sub-15 kW platform.

#3 Canara Bank

Third on the list is Canara Bank.

The public sector lender's net profit stood at Rs 56,784 million (m) for the year ended March 2022.

For this year's first three quarters combined, the bank's net profit has already surged FY22's net profit. The net profit for first three quarters stands at Rs 74,290 m.

This year's profit may come in a little over Rs 90,000 m.

Signs of revival were visible already when we first wrote to you about how PSU banks could rule once again.

Canara Bank is now in the elite list of top PSU banks by growth. The bank has doubled its advances in the last five years, reporting a 5-Yr CAGR of 15.5%. And while the advances have doubled, the NPAs have halved, suggesting a massive improvement in asset quality.

Canara Bank's NPAs have gone from a whopping 7.5% in the financial year 2018 to 2.7% in 2022.

Its asset quality is at the best levels in more than 24 quarters.

The robust growth has enabled the lender to expand its margins, turning its losses into profits and boosting its return on equity. The average RoE in the past 5 years stands at 16.4%.

The bank's increased focus on credit expansion drove this success.

In the past one year, Canara Bank shares have gained 13%.

#4 IDFC First Bank

Next on the list is IDFC First Bank.

The bank was founded by the merger of erstwhile IDFC Bank and erstwhile Capital First in 2018.

The private sector lender's net profit stood at Rs 1,454 m for the year ended March 2022.

For this year's first three quarters combined, the bank's net profit has already surged FY22's net profit. The net profit for first three quarters stands at Rs 16,345 m.

This year's profit may come in a little over Rs 20,000 m.

Aided by strong credit growth, IDFC First Bank saw healthy rise in both interest and non-core earnings and also improved its asset quality.

In the last five years, the bank has increased its advances at a CAGR of 19.1%. Its asset quality is not terrible with a NPA of 1.52% in the financial year ending 2022.

However, the bank lacks a proven record of profitability and strong return ratios. It has reported a loss twice in the past 5 years.

But the lender seems to be turning a new leaf. The company sports a relatively clean balance sheet and is gearing its focus towards high margins business. It is confident of maintaining high margins in the future.

The bank's management has guided for 25% YoY growth in loans and 50% YoY rise in core pre operating profit in the financial year 2023.

All of this is reflected in its share price performance for the year gone by.

#5 Oberoi Realty

Last on the list is one of the most reputed brands in the real estate market.

Oberoi Realty develops residential, commercial, retail, and social infrastructure projects in one of the major real estate markets in the country - Mumbai.

It also offers hospitality and property management services.

The company's net profit stood at Rs 3,819 m in the year ended March 2022.

For this year's first three quarters combined, the company's net profit has already surged FY22's net profit. The net profit for first three quarters stands at Rs 5,472 m.

Robust demand prospects of residential projects in Mumbai, along with movement in construction activities in ongoing projects helped Oberoi Realty to achieve this feat.

The company is surrounded by dark clouds ever since it announced that sales in the December 2022 quarter have fallen sharply compared to a year ago period.

The company's shares have also taken a beating.

Which other midcap stocks have surpassed their FY22 net profit?

Apart from the above, here are other midcap companies which have surpassed previous year's net profit with a quarter still left to go:

Company	FY22 Profit (Rs m)	TTM so far (FY23)
L&T Finance Holdings Ltd.	2,182	24,685
Shriram Finance Ltd.	27,079	38,091
The Indian Hotels Company Ltd.	(345)	5,441
Aditya Birla Fashion and Retail Ltd.	(807)	2,606
SJVN Ltd.	9,775	12,294
Max Healthcare Institute Ltd.	3,311	5,660
The Federal Bank Ltd.	18,898	21,080
Trent Ltd.	2,496	4,494
Ashok Leyland Ltd.	5,418	6,287
NHPC Ltd.	35,377	36,243

Standalone data
Data Source: Ace Equity

In conclusion, tracking the performance of these stocks before the release of their annual report opens an opportunity for investors to potentially benefit from a stock rally.

Stay ahead of the curve.

In the coming days, we will also cover similar version for smallcap stocks, bluechip stocks and even penny stocks. Stay tuned.

Happy investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...