Buy Sun Pharma, Avoid Dr Lal PathLabs, Says Mayuresh Joshi

Mayuresh Joshi of Angel Broking says prices of some midcap stocks have run-up ahead of earnings expectations. Investors should buy banks, auto and select pharma names, while avoiding capital goods stocks, he added.

Stock Talk:

Avoid Dr Lal PathLabs: The diagnostic chain had a stupendous listing, which was expected. The company has cash of Rs 148 crore on its books and is looking to expand across geographies. However, all positives are priced in. Valuations are expensive, so wait for declines to buy Dr Lal PathLabs.

Buy Sun Pharma: The stock has seen correction and a lot of issues have got factored in the price. The warning letter about Halol facility is unlikely to translate into an import ban, which is a huge positive for Sun Pharma. It is a good bet for long term investment.

Avoid Reliance Communications: Deleveraging of balance sheet should start soon. If Aircel merger goes through, we are looking at second biggest operator. However, data revenues are shrinking, voice realization is also coming down and there is looming competition from Reliance Jio - factors that will weight on the telecom sector. Telecom stocks are likely to underperform the broader markets.

Avoid Tata Steel: Europe realizations are likely to be muted over next few quarters; volume increase in domestic markets is being aided by softness in input prices. Tata Steel has huge debt. The stock is likely to be soft after the recent rally.

Avoid Gail: Risk reward is a question mark though the stock might rise 8-10 per cent over 12 months. Utilization is running high; there are no more under-recoveries on gas, so whatever positive news was expected has come through. But we are not comfortable with core business performance in terms of cash flow generation.