Eight For 2007

Even if you are the perennially optimistic investor who does not believe that the Indian growth story is anywhere near its conclusion, you have to admit that the bulls are running out of steam. Face it. We have already witnessed the demise of a broad-based rally when any and every stock moved up. The market has got much more discerning and volatile. And if you don't agree, just look at the numbers. In 2004, just over 400 stocks (out of the 2,000 odd traded on the BSE) ended the year in the red. That is just 20 per cent of the entire universe. The very next year, the number rose to 25 per cent as around 550 stocks (out of 2,200) closed with losses. In 2006, this jumped to 50 per cent. As many as 1,200 stocks out of the 2,400 traded on the BSE ended in the red. And this was despite the Sensex gaining over 40 per cent. Prune the list down to include only the stocks with a market cap of Rs 100 crore or more, and you will find that a significant 368 (out of 951) ended 2006 in the negative territory. We are not for a moment saying that the rally has ended. But what we are very clearly advocating is that to make money in the market, one will have to pinpoint the right themes and stocks. In this month's cover story, we present you with eight recommendations made by ICICI Direct. These stocks have not been picked with a top-down approach where first a sector is examined and then good buys within it are picked. Instead, these stocks have been selected by taking a bottom-up route which identifies good value picks. The stocks recommended by ICICI Direct are done so only after the company fulfils the strict internal benchmarks of value and growth. A quantitative model throws up investment opportunities, which is re-verified by company via management interaction followed by extensive business modelling factoring macro and company specific variables. You will notice a clear bias towards mid-caps in the recommendations. Because we believe that's where the value lies. Banswara SyntexRajasthan-based Banswara Syntex (BSL) is among the integrated textile players manufacturing man-made, synthetic, blended, cotton yarn and garments. The company's products are exported to over 50 countries. Among the domestic brands, the company supplies to Provogue, Park Avenue, Arrow, Lifestyle, Westside and Pantaloon. As part of its Rs 250-crore expansion drive, the company plans to increase its capacity from 92,032 spindles to 1,60,000 while increasing the number of looms from 143 to 207. The company is also looking forward to add capacities in value-added products. BSL, which was until now known only as a yarn manufacturer, is forward integrating into high-margin garment manufacturing. The garment manufacturing business is likely to drive the top line of the company. The company is increasing its garmenting capacity to 28,60,000 pieces per annum. The garment business is expected to grow at a CAGR of 147 per cent over FY06-FY08. So far the company's profitability had been restrained due to the high cost of power. In an attempt to reduce the expenditure, the company is setting up its own power plant. The 18-mw thermal power plant is expected to be operational by February. The company's current power cost per unit is Rs 4.2. Post-commissioning, the cost is expected to come down significantly to Rs 2.8. The benefits of the lower power cost would start showing up in FY '08. The power cost is expected to decline to 6.8 per cent of net sales in FY 08. On its expanded capacity, the company expects to save around Rs 16.7 crore, thereby boosting bottom line significantly. BSL has entered into a joint venture with France-based Carremen Michel Therry Group. The