9 stocks shine in brokerages' portfolio

STREET CUES

With the Sensex scaling new peaks and analysts betting that the benchmark index will touch the 15,000 or 16,000 mark this year, brokerage houses SBI Cap Securities, India Infoline, Emkay Share and Stock Brokers advise investors to watch out for nine stocks.

Gujarat Ambuja Cement, Great Offshore, Novartis, Nagarjuna Construction, Indraprastha Gas, Mangalam Cement, NIIT Technologies, Nucleus Software and Garware Offshore are the companies that have become a hit with the broking firms for the new year.

SBI Cap Securities believes that Gujarat Ambuja will be an outperformer. A senior research analyst with SBI Cap said, "Aided by strong realisations and stable cost structure, we expect expansion of 900 basis points y-o-y in the EBITDA (earnings before interest, tax and depreciation) margin to 38.5 per cent for the quarter ended December 2006. Net profit is expected to grow 205 per cent and sales 70 per cent, y-o-y.

On Great Offshore, SBI Cap says, "We expect its overall sales for the December quarter to be Rs 134.9 crore, driven by sturdy day rates for all the vessel types in the offshore segment." The EBITDA margin is expected to remain robust at 48 per cent in Q3.

The pharma sector is expected to grow at over 40 per cent. Novartis would post 4.9 per cent y-o-y rise in sales to Rs 145 crore on the back of continued improvement in the performance of its OTC segment after the successful launch of the new Calcium Sandoz supplement, SBI Cap said in a research report.

Sachin Neema, head of research, India Infoline, recommends Nagarjuna Construction. He expects its sales and net profit to grow at a CAGR of 50 per cent over two years backed by a well diversified order book of Rs 7,000 crore, translating into an order book/sales of 3.5.

Neema also feels Indraprastha Gas has a good upside potential, owing to the cost economics of CNG and PNG, discretionary demand for CNG and industrial demand for PNG, which is expected to surge. He believes valuations are attractive at 8.4x FY09E earnings. Mangalam Cements is another stock Neema likes.

"After posting a turnaround in September 2006, we expect it to reap the rewards of the strong demand and firm cement prices over the next 18 months," Neema said.

Ajay Parmar, head - ideas research, Emkay Share and Stock Brokers, fancies NIIT Tech. He expects it to report 38 per cent CAGR in revenues and 43 per cent in profits for FY06-08.

The increased traction in its verticals (financials and transportation) in Europe, integration of the recently acquired ROOM Solutions, UK, and its joint venture with Adeco will drive the future growth of the company.

Parmar expects product company Nucleus Software's sales to grow at 42 per cent and net profit at 47 per cent. At Rs 695, the scrip is available at 13.9 times FY08 estimated earnings.

Garware Offshore, is Parmar's third pick. This focused offshore player has five anchor handling tugs and two platform supply vessels (PSVs). It has also placed orders for three more PSVs.