Post-Budget Focus:

Today I will focus my attention on three sectors only, where I have recently recommended some stocks: Good News in the Defense Sector: The companies which are supplying equipments to the defense departments are likely to get benefited immensely due to increased allocation of the defense expenditure upto Rs.90, 000 Cr. Hence, BEML, BEL, Premier Explosives Ltd etc are likely beneficiaries. In case of Premier Explosives it is double whammy:

(a) The company is expected to get a new contract from the Defense in this month, (b) It is going to complete the due diligence for the selling the assets of the mushroom division,

(c) It is going to utilize the proceeds for the sale of the assets, for further expansion and concentrate on Defense related deals or one can say focus on core competency,

(d) The proceeds will be utilized to retire the old debts the company is having at present,

(e) Its Special products division is going to add substantially both to the topline and bottomines,

(f) Its Overseas JVs has started to deliver, which is amply reflected in the last quarter results. Besides this the company will benefit from the buoyancy in the cement & mining ( read coal exploration) sectors, who are primary clients of Premier Explosives Ltd. It will also gain indirectly from the reduced Customs duty on Capital Goods (or one cay say inputs and machinery), sops to steel industry (which may lower price) and higher allocation for the Infrastructure. Good News for Construction Sector: The companies which are mainly into housing like Garnet Construction, Ganesh Housing, or Narendra Properties might be better placed as they are mainly into making of housing colonies and not Road Projects. Garnet Construction Ltd, Ganesh Housing Ltd and D S Kulkarni is already up today. In case of Garnet Construction Ltd there are additional benefits like government giving sops to plywood industry, which could arrest further price escalation of Plywood, which is an essential Building Material. There are also talks going on that the company could go in for private placement of equity at Rs.150 per share to a US company which could further take the share price to around Rs.170—Rs.180 range within the next one to 2 months time, once this is officially announced. One must have seen how private placement for Soma Textiles & Industries Ltd triggered a rally in the counter. Hence I am positive on these companies, though Garnet Construction, which I recommended earlier, is my best pick today also. It is to be noted that however much the government tries to pull down the prices of the Real Estate, it will not succeed as the demand is outstripping supply by miles. With Both FDI and FII investmemnts peaking, junior and senior executives are flush with money to go it for the purchase of houses. Also, with still liberal interest rate regime, people can easily go for the purchase of apartments…..Bharat Nirman Still remains the cornerstrone of UPA Government’s policy with 31.6 % increase in budget allocation to Rs.24, 603 Cr. 7, 83,000 rural houses have been constructed up to December, 2006 and 9, 14, 000 houses are under construction and the annual target of 15, 00, 000 houses is likely to be exceeded. This is a great news for housing companies. Clearly Bharat Nirman would continue to be a key business provider to the small and large infrastructure companies in the country. 3. Bad News for Media Sector: There were no incentive in the Budget for the media sector. On the Contrary, the withdrawal of customs duty exemptions/ concessions on recorded magnetic tapes for producing TV Serials and other equipments such as TV Cameras, audio recording equipment and so on is likely to have a negative impact on content providers such as Balaji Telefilms and UTV Software and on broadcasters in general. Digital Cinema Projects will not attract a customs duty of 7.5 %, which will have a negative impact on Pyramid Saimira, Cinemax Ltd, which imports its digital projectors. One of the recommended companies, Sanguine Media Ltd, has shed all these negatives and is in the buyer freeze.

But then all these are proposed and unless the Finance Bill is passed in the parliament, all the provisions are as usual.

More in the following positings.............

Best wishes,

Suman Mukherjee

India

www.sumanspeaks.blogspot.com