Networth pointed out that a downside of 5-10 per cent is still expected in large cap stocks on the back of higher NPA anticipation. Small caps follow the benchmark and as per empirical evidence, fall is small and mid caps is disproportionately higher vis-a-vis large caps. Therefore small caps will feel the pain for the next few quarters and this would be a right opportunity for investors to take partial positions by selective buying in high growth niche areas.
Networth’s short-list of three stocks for investment in 2012 are the following:
Tilaknagar Industries is a fast growing IMFL player with a dominant position in major liquor market (South India) with a strong product portfolio of more than 30 brands. Tilaknagar Industries has increased its distillery capacity and the utilization levels are expected to increase significantly from ~ 25% currently which would not only drive strong revenue growth, but also would be margin accretive. Recent acquisition coupled with JV with leading MNC liquor players are further triggers for the Tilaknagar Industries stock to outperform.
CMP Rs. 16.65
Himalya international recent expansion in Mehsana and its tie-ups with leading Quick Service Restaurants (QSR) and JV with J R Simplot will help double its revenue in FY13. Post expansion Himalya international ‘s mushroom capacity has more than tripled and the new segment of appetizers and French fries will help broaden its revenue mix. The utilization levels are slowly expected to increase which would be margin accretive along with robust revenue growth.
Oriental Carbon & Chemicals
CMP Rs. 91.40
Oriental Carbon & Chemicals is a leading supplier of insoluble sulphur, a critical raw material for radial tyres, whose demand is sustainably rising on better operating performance. As it is in great demand, Oriental Carbon & Chemicals doubled the capacity which was entirely funded through internal cash accruals and debts. Currently the Oriental Carbon & Chemicals stock price is ruling weak on some teething problem at new plant which is likely to be fully stabilized by year end and we estimate profitability to expand 40% in FY13.