Finquest's top midcap picks

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » 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 Gammon India BSE | NSE 30/05/12 Are Mutual Funds betting on Gammon India? Other Stocks in this news Garware Wall Ropes |

Speaking to CNBC-TV18, Sejal Doshi , CEO, Finquest said that his top midcap picks are Garware Wall Ropes and Gammon India . Doshi added that Fareware Wall Ropes is widening its applications. Finquest likes the business model, where there is a CAGR growth of sales of 26%, over the next three years and profit growth of 35%.

 

Doshi commented that they like Gammon India because of the embedded value, which are there in their infrastructure subsidiaries. They believe it will provide an upside to the valuations.

 

Excerpts from CNBC-TV18's exclusive interview with Sejal Doshi:

 

Q: Why do you like Gareware Wall Ropes? You have a 50% price appreciation target from here. What is going to drive growth?

 

A:  Essentially Gareware Wall Ropes provide applications, for the cottage and infrastructure industry. They are market leaders, in terms of the application based on fishing, shipping, sports, and infrastructure projects.

 

They make high-end ropes and nets, mainly in the cottage business segment, which are being used for both technical and industrial fishing vessels, ranging from 100 HP to 15,000 HP.

 

Also, they have got industrial and fabricated products also. So, over here, it is a consistent growing business segment, where they are enjoying almost 85-90% marketshare in the domestic market and around 5% in the international market.

 

Apart from this, the applications have also been widening. From fishing, they are moving to shipping, material handling and even sports. So, this segment will continue to grow, which is constituting roughly around 80-85% of the total sales of the company.

 

The second business segment that they have diversified into is geo-synthetics, which is a new emerging area, where we see a lot of applications. It is the civil engineering segment, especially the coastal protection, railways and roads.

 

Its an upcoming segment where they are now dealing with the governmental agencies. They have made some good breakthrough, but the big order size will kick in, because the test runs have been pretty successful. So, this is one area where we see revenues growing from 15-25% of the total sales.

 

Q: What about the risk on the volume side, as it is not a very liquid stock?

 

A: Essentially, it is slightly a liquid counter. But if we see it gradually, it is a slightly small company. But we like the business model, where we are seeing a CAGR growth of sales of 26%, over the next three years and profit growth of 35%.

 

Gradually, as we see more and more participation increases, volume will increase. But it is more from a fundamental perspective that we have been looking on the stock.

 

Q: Gammon India has been run by the markets to quite an extent. Are you expecting value unlocking or core business growth?

 

A: We have been looking in Gammon India because of the embedded value, which are there in their infrastructure subsidiaries. On the real estate, where the company has definitely got a good amount of land bank, they will unveil that plant shortly. So, that will provide an upside to the valuations.

 

Talking about the core business, it is well diversified across segments of road irrigation, civil hydroelectricity and may be road is still contributing 50% of the total order book. The embedded value will provide a huge upside to the stock.

 

Disclosure:

 

Personally, we do not own any of the stocks. But we have been recommending to our clients and may be having positions on that.