Mid-caps still hold sway

PORTFOLIO WATCH

Murudeshwar Ceramics, Bank of India (BoI), Bombay Rayon Fashions, Allsec Technologies, Genus Overseas, Opto Circuits, Venus Remedies, Garware Offshore and Lloyd Electric are some of the stocks that brokerages have recommended for the medium term.

Harendra Kumar, head of research at ICICI Direct, rates Murudeshwar Ceramics, BoI and Bombay Rayon as outperformers for the next 9-12 months. Its net profit is expected to rise 23.8 per cent . At the current price, the stock is attractively valued at 3.9 times and 3.1 times its estimated FY07 and FY08 earnings respectively.

BoI with a strong international presence is considered an efficient public sector bank. An ICICI Direct research report states: "The bank is likely to post higher profitability going forward on the back of sustained credit growth, which continues to be fuelled by retail and SME financing. Improved asset quality and higher deposit mobilisation will help it sustain net interest margins even in the rising interest rate scenario. The stock fares well on all valuation parameters and appears attractive among its peers."

Bombay Rayon, one of the country's oldest fabric manufacturers, is recommended as a buy by Kumar, as it is transforming itself into an integrated garment manufacturer. The aggressive expansion and strategic shift to high-margin garments will catapult the company into a high-growth orbit.

The favourite stocks of Sachin Neema, head of research, India Infoline, are Allsec Technologies, Genus Overseas Electronics and Opto Circuits (India). Allsec, a BPO, is expected to grow its revenues by 49.1 per cent and earnings by 48.3 per cent a year from FY06 to FY08. The Carlyle group recently pick up 20 per cent stake in it and will be increasing its holding with the completion of its subsequent open offer. Allsec's top line growth will be driven by inherent business from existing its clientele, inorganic initiatives and Carlyle's reference.

Genus is another stock that has a good upside, says Neema, as it is one of the forerunners in implementing electronic meter-reading technology in metering and is the largest electronic meter manufacturer. Genus stands to be the largest beneficiary of the ongoing Accelerated Power Development and Reform Programme, under which the government intends to implement 100 per cent electronic metering. Its order-book stands at Rs 490 crore, which comfortably covers it for the second half of FY07 and partially for FY08.

Opto Circuits, an established player in the niche segment of medical electronic devices and medical monitoring products, is another favourite stock at India Infoline. The company is expected to see a CAGR of 63 per cent in revenues to Rs 370 crore over FY06-FY08.

The quick picks of Amitabh Chakraborty, business head - PCG Research, Brics Securities, are Venus Remedies, Garware Offshore and Lloyd Electric.

Venus, which makes medicines in the anti-cancer and cephalosporin segment, has posted sequential growth in sales and net profit every quarter over the last eight quarters. Garware Offshore services the offshore drilling support function for exploration companies, including ONGC and Transocean. It has been able to contract vessel supplies in a staggered fashion judiciously. Lloyd Electric, which has $30 million cash in its balance sheet, recently bagged the contract for air-conditioning Delhi Metro coaches and has also entered into the manufacturing of refrigeration coil in technical collaboration with a Korean company.