Saurabh Mukherjea exits 5 mid and smallcap stocks, picks 2 new ideas

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Star fund manager Saurabh Mukherjea, who runs Marcellus PMS, has exited five mid and small-cap stocks and picked two new ideas: Go Digit General Insurance and Jash Engineering.

“We continue to make suitable changes in the portfolio (particularly the Little Champs portfolio) to create more diversity (increasing the mix of domestic vs the historical heavy leaning towards the export-oriented franchises; reducing the historical high concentration of chemical-oriented companies in the portfolio) and bring the healthy earnings growth trajectory back in the portfolios,” Mukherjea said in a note to clients.

In its midcap-focused Rising Giants and smallcap-heavy Little Champs funds, Marcellus has added two new stocks.

Go Digit General Insurance
Mukherjea said one thing that stands out in Digit’s numbers is its underwriting ability.

“Within 6-7 years of operations, it has been able to achieve a golden combination of scale + solid underwriting outcomes. Operations are leaner despite running a higher share of retail business which is an opex incentive and lower scale. Digit is currently at 6% in motor insurance and its overall market share in the non-life insurance sector is low at ~2.7%. In this context for Digit to grow at 1.5-1.8x industry growth is plausible, when overall market share is just 2.7%,” he said.

Shares of the newly listed firm have risen by about 2% in the last 3 months.Jash Engineering
Jash Engineering, which manufactures water flow control equipment, including sluice gates, valves, screens, and filters, has seen its revenues grow at a 34% CAGR over the last five years.Jash has a strong reputation and is a pre-qualified vendor for most municipalities, as well as other government bodies, including the Nuclear Power Corporation, Marcellus stated.

The stock is up around 43% so far in the year.

Stock Exits
Marcellus has exited RHI Magnesita from both the mid and small-cap funds. Additionally, the mid-cap fund has also seen the exit of SKF India and Ratnamani Metals & Tubes, while Prudent Corporate Advisory Services and Tega Industries have been removed from Little Champs.



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