Does your portfolio have these midcaps?

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Bidding for transmission projects starts Good times ahead for markets RPG Transmission bags order, stock up 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 Hind Dorr-Olive BSE | NSE 30/05/12 Are Mutual Funds betting on Hind Dorr-Olive? Other Stocks in this news RPG Transmission | Tayo Rolls |

A lot of analysts are betting on the small and mid-cap space to throw up stocks that will outperform the broader market and give better returns to the investors over the next 6-12 months.

DD Sharma of Anand Rathi Securities comments on three stocks that he likes. They are RPG Transmission , Tayo Rolls and Hindustan Dorr-Oliver .

Sharma states that the mid-cap correction started even before the market started correcting, as they corrected by 30% and thereafter, corrected further.

He believes that overall, the mid-cap segment is close to bottom and hence the downfall is very limited in the segment.They are bullish on this segment and recommend the mid-cap stocks as well as the mid-cap mutual funds for investment.

Excerpts from CNBC-TV18's exclusive interview with DD Sharma:

Q: What is your overall call on the market from these levels? What is the call that you will be taking?

A: Unless some new negative news comes in the market, I think market is looking for the bottom close to 3575 in the Nifty and 12,300 or so in the Sensex levels, but the confirmation will come only in a couple of weeks. If in the next couple of weeks, the market doesn't breach those lower levels, then I think market will bottom out from these levels. Or if it crosses the higher levels of 13,200 and 3800 in Nifty,then we can say market has bottomed out.

Q: RPG Transmission - what do you like about this stock and what is the target price you are quoting on this one?

A:The mid-cap correction started even before the market started correcting; they corrected by 30% and then when the market corrected, mid-caps corrected still further. Overall, the mid-cap segment is close to bottom. So downfall is very limited in the mid-cap segment, nowadays, which is why, we too are somewhat bullish on the segment and are not only recommending those stocks but are also recommending the midcap mutual funds for investment purposes.

Coming to RPG Transmission, everybody knows that there is a huge potential in the transmission business. I think in the next five to seven years Rs 50,000-70,000 crore goes into setting up the transmission network. So outlook and potential is huge and this company is one of the best companies in the transmission business.

It has one of the best transmission tower testing facilities and a very large capacity for making transmission towers alongwith the galvanizing facility; plus they have good order books too - they have around Rs 400 crore orders in hand.

For 2007, we expect them to show earnings per share of around Rs 12-14, while in 2008 they could show close to Rs 18-20. So at this price 2008 earnings is discounted by just 10 times. So I think it is attractively priced, because long-term and sustainable growth potential is there. 

Q: What is the target from 400?

A: We don't give the target usually in the mid-cap segment.

Q: What is your call on Tayo Rolls at this point of time - healthy operating margin business at least in Q3? What do you like about it and what sort of growth do you see for the company going forward?

A: Tayo Rolls is into manufacturing of rolls, which are used for packaging of steel, whether it is HR coil, which is rolled on that or whether it is even SS coil, all of which are used for steel packaging. Capacities for such kind of rolls in India is very limited.

There are only two companies in India - one is Tayo Rolls and another is Gontermann Peipers. Global capacity is also short and overall demand situation for the rolls for this kind of activity is very strong; therefore the company is continuously raising the capacity. They make the rolls as per the requirement of the customers.

Therefore, they are able to cater to all the leading players, not only in India but in the world market; they also cater to Corus, Posco, Thyssen, etc and many other leading names. The company is doing very well; the current year margins are very strong and the company has set a vision of five-fold business in next five years.

So we think there is a strong growth potential in this company in the next four to five years and as Tata has acquired Corus, which is is one of its clients via Tayo, which is a Tata Group company; therefore, we think that export to Corus will also improve significantly. Overall, the outlook is very fantastic. For 2007, they can report earnings of around Rs 20 and 2008 they can report earnings of around more than Rs 24.

Q: Hindustan Dorr-Oliver, in water and chemicals treatment space - what are the FY07-FY08 targets for this one?

A: Hind Dorr Oliver is right now IVRCL group company. It is into two major businesses of engineering, procurement and construction, or EPC. One is the mineral beneficiation and the other is environmental management, which means the water treatment, chemical treatment or treatment of even other kind of pollutions such as the one caused by air.

They are doing very well and have an expertise in mineral beneficiation. Their largest plant right now is Vedanta, which contributes almost 50% of its business. The best part of this is that the stock has fallen from around Rs 90 levels to Rs 60 levels after this Budget proposal of 80 IA, whereas the company is not availing any benefit under 80 IA. So this fall is not warranted for this company.

But another very exciting aspect is that for the next year, the company's order book is likely to swell. They are likely to get significantly large size orders for mineral beneficiation and for other products also. So right now, though the current order book position is Rs 250 crore only, in the next three to four months, they are likely to get orders of around Rs 1200 crore.

Q: Any disclosures?

A: Out of these three, I own Hindustan Dorr-Oliver.