Do you own these two midcap gems?

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS If mkt touches 19K, it'll go lot lower: Envision Cap Watch out for these midcap stocks! All eyes on midcap space today Largecaps under pressure: Sensex down over 400 pts Best stocks to buy in volatile mkts ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Asian Oilfield Services | Vipul |

V Swaminathan , Director, Wealth Management Advisory Services , said Asian Oilfield could see a turnover of between Rs 50-60 crore, bottomline close to Rs 11-12 crore, and an EPS of between Rs 15-16.

 He is also bullish on Vipul which has a presence in the real estate space.

 

Excerpts from CNBC-TV18's exclusive interview with V Swaminathan:

 

Q: Could you start off with Asian Oilfield? It has a very interesting niche of seismic services. Why do you like this stock and what is your target on it?

 

A: The stock looks very exciting. Seismic survey is a precursor to oil exploration. With oil on the boil and drilling rates being so high, companies have to first look at seismic survey, identify the area, and then target where to drill.

 

The scope for this business in India looks enormous. In the coming few years, the market could be about Rs 8,000 crore. This company is a niche player. It was unknown till about a year back, when it was resurrected into the space by putting additional capital. In FY07, it has performed extremely well. This year, I expect turnover to shoot up between Rs 50-60 crore, with a bottomline of close to Rs 11-12 crore and an EPS of between Rs 15-16.

 

Q: The operating margins of this company for FY07 went from 13% to 31%. Was that an aberration or will margins stabilize at those levels?

 

A: It is not an aberration. With Alphageo also, margins are close to 40-45%. This 31% was because its seismic survey business went up. This year, my estimate is that margins would be in the region of about 40%. In FY09, we could see a margin of about 45%.

 

Q: The other stock pick that you have is Vipul, which is currently trading at about Rs 197. It is a real estate player. Does their development plans and land bank excite you the most? What kind of CAGR do you expect the company to deliver and thereby a price appreciation?

 

A: Vipul is an unknown player in the Indian real estate market. In Gurgaon-NCR, it is one of the prominent players and has a premium land bank of close to 500 acres. It has a developable area of close to 30 million sq ft. The team here is led by Punit Beriwala who has more than 150 people on the ground.

 

What interests me the most are what the two subsidiaries are doing. One is called Vipul-Laing O'Rourke which is into remote control services in the UK and UAE. The other does facility management. In facility management, it has 15 million sq ft under management. That revenue should go up according to me. Overall, the company is in a sweet spot. It is growing at above 50% and bottomline should show up in times to come.

 

Last year, they did Rs 40 crore in PAT. This year, they should do about Rs 60 crore in PAT. They are very focused on what they are doing. In times to come, they will deliver what they want to deliver.

 

Q: The other company that you have chosen is Kriti Industries, which is into pipes and solvent extraction. What is your growth and price target for the company?

 

A: Kriti is into the businesses of plastic pipes both PVC as well as polyethylene. Both these sectors are witnessing real growth. The other business is solvent extraction, which is in a sweet spot because parity prices in soy have gone up tremendously in the last few months. The crops in North America and South America have been muted because a lot of plantation has shifted to corn, because of ethanol.

 

Even in China there is a crop shortage. Indian soy manufacturers this season are going to witness a booming demand for their products. The parity, wherein you convert soybean into soy oil as well de-oiled cake, is upwards of Rs 2,000. As a result, most crushers this time are going to make fantastic money including Kriti.

 

From just Rs 3.50 EPS, it could deliver between Rs 20-25 this year. That should make things very exciting. Both businesses are growing at about 100% this year. My target turnover this year would be about Rs 650 crore for this company.

 

Q: Could you give us individual price targets on all of these three stocks?

 

A: I generally do not give individual price targets. These businesses are growing well since smallcaps and midcaps are the segments where growth is happening in the country. I would tend to think that all the three counters that I have discussed with you are multi-baggers in their own selves. I wouldn't want to give a price target.

 

Disclosures:

My clients and I may have an interest in the stocks and sectors discussed today.