Gujarat State Fertilizers & Chemicals (GSFC) is one of the biggest beneficiaries of the Nutrient-Based Subsidies Scheme (NBSS), on account of its captive ammonia production facility.

Its EBITDA margins are likely to improve from 11 per cent in FY10 to 18 per cent by FY13 end, due to the implementation of NBSS and an improvement in its chemicals business margins. The TIFERT project for building a phosphoric acid capacity of 3.6 lakh MTPA will boost raw material availability. Caprolactam prices rebounded to USD 3580/MT in September 2011, compared to USD 3190/MT in June 2011. Spreads bounced back and reached an all-time high of USD 2465/MT in the first half of Sep 2011, surpassing its previous peak of USD 2390/MT achieved in March 2011.

The company has further expansion plans for some of its chemical products, which include methanol, caprolactam and melamine, to support its chemicals business. One can look at the stock for medium to long-term gains.

Dr. Reddy’s Laboratories (DRL) is a leading generics manufacturer, and one of the leading branded formulations players in the domestic and the Russian markets. DRL's key strength has been vertical integration, which made it a leading Indian pharma company in the US generics business, clocking USD 430 million sales in FY11 despite intense competition and pricing pressure. It has launched nine products in the US generics market so far in FY12, of which five  have limited competition.

These factors, along with US generics sales led by limited competition and niche product opportunities are likely to post robust growth going forward. The branded formulations sales in India and Russia too will maintain progressive growth. The company has enhanced its business focus in domestic formulations to penetrate deep in the rural Indian markets. One can look at the stock from a medium to long-term perspective.