Top 4 Undervalued Midcap Stocks to Watch Out in 2025

In this market, it is difficult to find new ideas and companies to invest your capital into due to valuation concerns.

As we navigate an ever-evolving financial landscape with geo-political tensions on the rise and macro-economic uncertainty, investors become risk averse and try to find companies where valuations are relatively cheaper.

The year 2025 holds particular promise for midcap stocks, especially in light of current economic trends, technological advancements, and shifting consumer behaviours.

As industries adapt to post-pandemic realities and global economic uncertainties, many midcap companies are positioned to capitalise on these changes.

Yet, despite their potential, several of these stocks remain undervalued, presenting savvy investors with unique opportunities to enter before they gain broader recognition.

In contrast to their larger counterparts, midcap stocks can offer the agility of smaller firms and higher growth potential, making them attractive to investors looking for value.

In this article, we'll explore the top four stocks that have that stand out for their compelling fundamentals, innovative business models, and market positioning.

Whether you're a seasoned investor or just starting, these insights could provide valuable perspectives on emerging opportunities.

Read on...

#1 ACC Ltd

ACC Limited (incorporated in 1936), a part of the Adani Group, is principally engaged in the business of manufacturing and selling of cement and ready mix concrete.

The company has manufacturing facilities across India and caters mainly to the domestic market. The products portfolio of the company includes cement, ready mix concrete and construction chemicals.

ACC derives 90% of its revenues from the cement business, 7% from ready mix concrete (RMC), 1% from clinker and remaining 2% from other income.

The company has a manufacturing capacity of 34.5 MMTPA from its 17 cement plants and 79 ready mix concrete plants across India.

ACC also operates 8 captive power plants for power requirements of its cement plants. The company's distribution network includes 56,000 channel partners/ retail points.

Ambuja Cements Limited (50%) is the holding Company of ACC Ltd and LafargeHolcim Ltd is the parent company for the group.

ACC and Ambuja cement together have 12-13% capacity share in the Indian cement market.

Coming to the financials, ACC reported a -1% degrowth in revenue in Q1FY25 and EBITDA degrew by 11.9%. EBITDA margins also deteriorated from 14.8% in Q1FY24 to 13.2% in Q1FY25.

Going ahead the management says that the cement industry is facing pressure with cement prices down 5-6%.

However, they remain optimistic about recovery post monsoon and after the festive season.

ACC Ltd currently trades at 23.4 times of its trailing 12 months earnings per share against its 3 year median PE ratio of 28.9 times.

#2 Ashok Leyland Ltd

Ashok Leyland is the flagship company of the Hinduja group, having a long-standing presence in the domestic medium and heavy commercial vehicle (M&HCV) segment.

The company has a strong brand and well-diversified distribution and service network across the country and has a presence in 50 countries.

Ashok Leyland is the second largest manufacturer of commercial vehicles in India in the medium and heavy commercial vehicle segment, fourth largest manufacturer of buses in the world, and the fifteenth largest manufacturer of trucks globally.

The company derives 88% of its revenues from commercial vehicles space and balance 12% from financial services. Geographically, company derives 89% revenues from India and balance 11% from exports markets.

Ashok Leyland has 5 manufacturing plants in India and 1 each in the United Arab Emirates, Bangladesh, and Sri Lanka.

The company focused on expanding its global footprint across retail markets in Africa and continued strengthening its network in SAARC and GCC countries.

Coming to the financials, Ashok Leyland reported a 10.7% growth in revenue in Q1FY25 and EBITDA growth came in at 23.9%. EBITDA margins also improved from 15.6% in Q1FY24 to 17.4% in Q1FY25.

Going ahead, management remains optimistic about the commercial vehicle industry, citing favourable macroeconomic parameters, a good monsoon, and robust economic measures from the recent budget.

The company currently trades at 27.6 times its trailing 12 months earnings per share as against a 3 year median PE of 31 times.

#3 Oil India Ltd

Oil India Ltd is engaged in exploration, development and production of crude oil and natural gas, transportation of crude oil and production of LPG.

It also provides various E&P related services for oil blocks.

The company is engaged in the exploration, development and production of crude oil & natural gas, production of LPG, transportation of crude oil & natural gas and generation of renewable energy.

Oil India has crude oil and natural gas domestic reserves (2P) of 70.56 MMT and 138.51 billion cubic meters respectively with exploration rights over 62 operating blocks in India.

The company's operation spreads over Assam, Arunachal Pradesh, Mizoram, Tripura, Nagaland, Odisha, Andhra Pradesh & Rajasthan and offshore areas in Andaman, Kerala-Konkan & KG shallow waters.

Oil India also owns and operates a 1,157 km long fully automated crude oil trunk pipeline between Naharkatiya Barauni. This pipeline runs through the states of Assam, West Bengal, and Bihar.

Oil India's subsidiary, Numaligarh Refinery (NRL), has embarked on a major integrated refinery expansion project to augment its capacity from 3 MMTPA to 9 MMTPA.

In the next 5 years, NRL plans to invest Rs 350 bn in completing these projects.

The company has launched an ambitious growth strategy focused on expanding its upstream acreage and enhancing its downstream operations through increased refining capacity while diversifying into strategic minerals and new energy sectors.

Coming to the financials, Oil India Ltd reported a growth of 45.9% in its consolidated revenues and EBITDA grew by 38% for Q1FY25. EBITDA margins however deteriorated slightly to come in at 33.6% versus 35.5% in the previous year.

Going ahead, management remains optimistic about achieving production targets with ongoing projects and infrastructure improvements. The management aims to increase the exploratory success rate to around 80% to 90% in the future.

#4 Motilal Oswal Financial Services Ltd

Motilal Oswal Financial Services Ltd was founded in 1987 is a well-diversified financial services firm. Motilal Oswal is among the top three brokers in terms of gross brokerage generated.

The company has a network spread 550+ cities and towns comprising 2,500+ business locations operated by their business partners and 1.6 m+ customers.

The company provides financial services in three categories: Capital markets, Asset and Wealth Management, and Housing Finance.

The company derives 71% of its revenues from capital markets (54% from brokerage), 18% from wealth and asset management, and balance 11% from housing finance.

Coming to the financials, the company reported a robust growth of 54.3% in its consolidated revenues along with strong EBITDA growth coming in at 66.4% for Q1FY25. EBITDA margins improved to come in at 60.2% versus 55.8% in the previous year.

Going ahead management says that increased transaction charges and STT rate increase may not significantly impact volumes and that they are optimistic about future growth and maintaining dividend payouts subject to business needs.

The company currently trades at 15.2 times its trailing 12 months earnings per share as against a 10 year median PE of 23.2 times.

Conclusion

In conclusion, the landscape of midcap stocks presents a compelling opportunity for investors looking to capitalise on undervalued companies poised for growth in 2025.

The four midcap stocks highlighted exemplify the key traits that make them appealing investment choices: robust fundamentals, growth potential, and favourable market positioning.

Furthermore, their valuations appear attractive when compared to historical averages and industry peers, indicating that they may be overlooked by mainstream investors.

As we look ahead to 2025, evolving consumer preferences, technological advancements, and shifts in regulatory environments could further enhance the growth trajectories of these midcap stocks.

As with any investment, it's essential to consider both the potential rewards and the inherent risks, ensuring that any investment aligns with individual financial goals and risk tolerance.

Investors should remain vigilant, conducting thorough research and keeping abreast of industry trends to ensure they make informed decisions.

Remember the challenges before diving headfirst.

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...