Ten stocks worth investing in – Part III

Opto Circuits India

Opto Circuits, too, is seen as a good investment, with the stock having fallen by over 45 per cent since it high in January 2008, thereby rendering its valuations attractive at 13 times FY09 estimated earnings and 9 times FY10 earnings.

The company manufactures healthcare products in the invasive and non-invasive segments. Historically, the company has been growing at 47 per cent during the last five years ending FY08, mainly on account of a series of organic and inorganic initiatives.

Given the strong growth across segments, the company is expected to grow at about 57 per cent during FY08-10, while its net profits could grow at a 45 per cent.

A part of this growth will come from by its subsidiary EuroCor, which is engaged in the design and manufacture of cardiac and peripheral stents. The estimated size of the global market for its products is pegged at $8 billion, and growing 15 per cent annually.

Opto's other business segments include medical electronic and monitoring products such as optical sensors, electro-medical equipment, security systems and pulse oxymeters manufactured.

The company's unique chip design capabilities, USFDA approved products and strong relationship with customers, have led to a 51 per cent revenue growth in the past.

Also, the company recently acquired US-based Criticare Inc for $70 million to strengthen its position in the non-invasive space. Along with this, the analysts also estimate that its invasive business would grow at 55 per cent during FY08-10, on the back of a strong product portfolio as well as a series of products to be launched in the near future.

Besides good fundamentals, the research houses like its business model, where the company is a niche player in the medical equipments commanding high margins along with high entry barriers.

Sintex Industries

Sintex is a strong play on the domestic consumption story. The company's popularity improved sharply after its foray into the plastic water-tank segment. While it is still a leader in the business, it has also moved into and emerged as a leader in many value-added plastic-based products.

These include new concepts like prefab and monolithic construction, which notably are growing at a fast clip. Analysts expect these businesses to grow at about 70 per cent, driven by strong order book of Rs 1,500 crore (65% of FY08 sales) and growing demand for quick and affordable mass housing solutions.

Additionally, the company has also emerged as a strong player in the auto and electric plastics product segment, after making several acquisitions in these businesses in FY08. The full impact of these acquisitions will be visible from FY09 and is expected to contribute about 27 per cent of consolidated revenues.

Driven by larger product portfolio, geographical diversification, higher domestic demand and benefits of its acquisitions, the company is estimated to grow over 50 per cent in consolidated earnings. At Rs 291, the stock is trading at attractive valuations of 10 times and 6 times estimated FY09 and FY10 consolidated earnings, respectively.

Thermax

Thermax was among the stocks that have fallen sharply due to the slow down in the industrial capex seen recently. High input cost also impacted sentiment, leading to a 60 per cent fall in its share price where valuations at 13 times its FY09 estimated earnings and 11 times FY10 earnings are proving to be attractive.

Importantly, except for these short-term blips, the company's fundamentals continue to hold ground. The company's order book of Rs 2,637 crore (Rs 26.37 billion) provides revenue visibility of about two years.

The company has also taken several initiatives, which should help sustain growth in years come. Thermax operates in a specialised segment within the engineering sector, catering to the needs of a number of industries. Also, the company is leader in small and medium-sized industrial boilers, heaters, and captive power plants in the energy sector.

Notably, the company will gain from its entry into higher capacity boilers, which are used by power utilities. It recently signed a 15-year agreement for sub-critical boilers up to 800MW with Babcock and Wilcox. The company has already completed the first phase of 3,000MW boiler facility at Baroda and the second phase is expected to be complete by October 2008.

In this direction, the company has already announced its largest order win ever, valued at Rs 820 crore (RS 8.2 billion) for the supply of a coal fired boiler to a captive cogeneration plant of a refinery.

While the margins may remain under pressure as 70-75 per cent of its order backlog is on a fixed price basis, these are already reflecting in the share price. Such issues are being taken care off with the company immediately securing inputs for new orders.

TV18

Stocks from the media sector are finding favour among many research houses post the market correction. Television Eighteen India (TV18) is India's premier 'Business News' broadcaster and leading content provider in the electronic media space. It owns and operates business channels CNBC TV18 and CNBC Awaaz and has several strategic investments in the internet business such as moneycontrol.com, which is among Asia's largest financial portals and commoditiescontrol.com.

The company's existing businesses have been doing well; news operations has witnessed a CAGR of over 54 per cent for the last three years, while the web and news wire business are currently in an investment phase.

Its internet subsidiary, Web18, operates different businesses like travel, technology, movie bookings and financial news. While TV18 holds 85 per cent in Web18, revenues are still small, but offer good scope for growth over the longer term.

On the existing and new businesses, the company's revenues are expected to grow at over 37 per cent over the next 2-years. However, its ability to replicate its success in its foray into print and digital media needs to be watched.

The company has already started the process and is acquiring 53 per cent stake in Infomedia. The acquisition will provide the company access to the yellow pages directory business and, several special interest magazine segments.

In the medium to long run, benefits would also accrue from its JV with Forbes (English business magazine), Jagran Prakashan (Hindi business daily) and global media giant Viacom for a strategic alliance across television, film and digital media.