Dalelorenzo's GDI Blog
17Mar/210

This is a market to buy, bet on these 4 pockets

As the consumers’ ability to spend in various fronts increases, the weightage of consumer stocks will increase in the indicators, says Chakri Lokapriya, CIO& MD, TCG AMC. Where are you at in areas of pickings in bank broths? Are you looking at some of the recipients of the combination and privatisation that we are going to see in the seat now? What about some of the smallest calls in the banking pack? There are a lot of pockets that will manifest for various reasons. One is the low priced PSU banks like Canara Bank, Union Bank. These banks are still trading at very low valuations, their GNPAs are coming down, their provisions are improving, and with the capital infusion that is around the corner, their balance sheets will look stronger. Whenever the bad bank ARC happens, it will be a very significant positive, which signifies the outlook for these smaller sized banks like Canara Bank looks very strong. On the other hand, is 15 -2 0% of the recognition flows through PSU banks or various government relevant campaigns. Wherever the money is flowing, the taxes are there. A couple of years ago, there was some amount of withdrawal from some of the PSU entities. Things like that will start returning. It is an incremental positive but not a huge, big positive because it is largely a dissemination of the same pie. But considering the fact that the overall credit is going to pick up, companies like RBL Bank which is still trading at only about one time book, down from three times book earlier, are going to see a significant upside. Finally, residence corporations like Repco which are trading at 0.6 -0. 7 seasons bible but have really decent business, will too advantage. With the inclusion of Tata Consumer , now there are six-seven purchaser companionships on the index. What do you stimulate of that and the kind of weightage they are given? Nifty historically has always underrepresented consumer interests broths. It was about three or four corporations and now Tata Consumer has also entered the index. In spite of that, companies like ITC have a very big heavines and a number of companionships like Jubilant, PVR -- which are all consumer facing corporations are still not will take part in the Nifty. It is a welcome thing that Tata Consumer is now a part of the index. It is a different matter that it is an expensive stock but on the other hand, greater India is still a 75% plus services economy. As the consumers’ ability to spend in various fronts increases, the weightage of purchaser assets will be enhanced. A case in point is the S& P 500 in the US. Two-thirds of the weight is buyer. We have a long long way to go from here to there. It seems that this is a buy on drop-off marketplace and the cop loped is pretty much intact. What would you be dared to buy afresh? Clearly it is a market to buy and there would be all the cyclically facing words, banks and financial services; second is metals because the world mobilize in metal prices will help companies like Hindalco, Tata Steel, Jindal Steel and Power. Third, the domestic facing infra companionships like Sadbhav Engineering, Nagarjuna Construction, PNC firms will benefit from the government’s push. Finally, the PLI firms like DLink and various other business which will benefit from a quick move to PLI are the types of sectors and companies I am concentrating on. We have been moving this move on crude and given that it is now inching higher at near one year highs what are you become of it and the resulting impact on specific identifies as well in light of that? Crude is manifesting the backlash and global economies. Last-place time, following pandemic lockdowns, lubricant had disintegrated to below $ 30 and now with the world opening up, it is back to about the $60 - $70 collection which is normally a exceedingly sustainable list for India’s economy. In prescribe to control inflation, it is possible to reduce the taxes which are making for half of the petrol and diesel expenditures and which have an impact on inflation. But in an economy which is rebounding at the current petrol and diesel costs, it is unlikely to make a significant dent on challenge especially when it is coming back strong. Where are you obtaining the potential for multifold returns if we look at the broader markets? In the broader market as well as the front line, look at the automobile ancillary firms -- be it tyre companies or some of the other ancillary corporations. Second is the metal companies and front line firms Tata Steel, Hindalco, Jindal Steel and Power will do is a good one. Thirdly and most importantly, financing of the. With the ascribe uptick across banks -- private and public sector -- and NBFCs, business will be the biggest beneficiaries. They have cleaned up their works in the last couple of years. As the economy improves, the valuations will improve for SBI, the smaller copies or even for "the worlds biggest" banks.

Read more: economictimes.indiatimes.com

9Mar/210

What to buy in auto & digital themes: Khemka

Pharma would continue to report good doubled toe raise move forward with steady boundaries, says Siddhartha Khemka, Head of Retail Research, MOFSL Auto has been a well discovered tale. Where do you realise fresh buying opportunities? A sector pirouette is happening and in the last couple of fourths, it is happening at a pretty fast pace. Auto did well for some time and then we realized a correction. The monthly crowds have been mostly okay and have been in line with beliefs and some are below beliefs. But the overall anticipation is that with the new year starting things will improve for automobile. Some of the companies have been talking about February being much better and at analysts’ matches and management interactions, there have been talks of improving profit. A case in point is Tata Engine, which was the major gainer out of the automobile bundle, yesterday. We had the managing for the investor’s day for JLR over the weekend and they seem to be focussed on improving profitability, increasing pay and well geared for the future with a start of a lot of EVs in the world markets. Apart from that, some of the auto ancillaries have been doing well in anticipation of impetus from the EV space and talks of PLI scheme for the automobile sphere. Within the OEMs, we like Maruti which is doing good in the passenger vehicle space. M& M is our opted collect to play the agricultural sphere and among the two-wheelers, we like Hero Moto. This is the preferred basket within the OEMs; within the auto ancillaries we like Motherson. We believe they are the best suited to benefit out of the entire world-wide change from the traditional automobiles to EVs. What is your outlook on privatisation of PSU banks? Do you like this theme? Yes. It sounds the government is pretty determined to go through with privatisation of PSUs. A mint of steps are being taken despite the times and postponements for umpteen eras for Air India privatisation. BPCL disinvestment was supposed to happen last year but got spread. But now the government has met its planneds very clear and are taking steps in the right direction. They are taking those steps -- be it in Concor or in Shipping Corporation. Now BPCL is selling off its stake in Numaligarh refinery as that division needed to stay within the public space. This paves behavior for BPCL to be privatised and this would be one of the biggest privatisations. We certainly like this theme. Historically, a good deal of these PSU firms are not that efficient. They has not been able to been at the forefront of growth. The only thing that they offer is appreciate in terms of trading at a much-much discount to some of the other peers. With the private participates coming in and turning around the business in terms of efficiency, profitability further improve and hence these evaluations. We have been positive on the OMCs for some time now. BPCL continues to do well and we is confident that with the Numaligarh refinery transaction at a much better valuation than earlier expected, the overall mark for these other refining enterprises is caused and hence that is a big positive step for BPCL. How are you looked at the numbers from the pharma space? Will we meet strong domestic as well as international growth across the board? Pharma has been reporting strong amounts for the last three consecutive quarters and upright pandemic, things have improved for the companies not only on the domestic front but including information on the international front with the US FDA become much more lenient in making approbation for flowers and concoctions. We have identified a strong product pipeline for a lot of these companies which are not related to Covid, but rather lifestyle cankers for which we will have heavy demand going forward. A bigger challenge for the pharma opening was the pressure on toll realisation which has easy off a lot post the pandemic. A fortune of raw material expenditures have come down leading to improvement in perimeters. We accept pharma would continue to report good double toe proliferation going forward with the continuous margins and that should lead to good returns from the cavity. Are there any broths in the brand-new economy gig frolic gap that you would propose? Does it interest you? Yes, this is a space which is a niche play and it is doing very well. This is a digital theme although different corporations are in separate segments. Some of the companies within this space that we like are IndiaMart which is in the B2B space, which is where JustDial has just participated. We are seeing how the valuation had run up for IndiaMart because of the scarcity payment that it was getting and which is now getting distributed with a second player like JustDial getting in. While we continue to like IndiaMart, we have lowered the rating to neutral having regard to the high-pitched valuation. On digital, we have recently established coverage on a brand-new stock -- SBI Cards. This is mainly a play on the increasing digitisation in terms of events which have accelerated announced the pandemic. SBI Cards is the second largest player in the Indian card space and it has the benefit of the parentage of SBI and payed its access to the client base of SBI, has received continuous growing in the past. The financials are pretty strong and the valuations are pretty cozy. That is a stock within the new age digital theme that we like. How are you looking at the Tata Group business like Trent, Tata Consumer? Some of these specifies in the consumer basket have doing well. Tata as a group has ascertained a huge modify announce N Chandra coming in as the chairman. The part group of business have refocused towards return fractions and efficient use of capital is the main mantra rather than the earlier intention of expanding and becoming a global leader. So that has helped a lot of these companies. We have assured the change in leadership management and consolidation of the consumer business from Tata Chemicals into Tata Consumer as well as closing of some of the loss-making businesses globally. From here on, the fib for Tata Consumer is about the process of improving margins which will lead to higher growth in net profit. On the top course, the focus is going to be integration, economies of magnitude and cross selling between the two segments. The third new segment that they are launching is Tata Sampann which is also doing well. On the operating leveraging, improvement in EBIT margins because of the its effectiveness and magnitude will lead to higher growth. Similarly, Trent is in a kind of unlock trade. With the lockdown, all these plazas and showrooms were shut and retail stores were closed. With the reopening, we have seen pent-up demand and a lot of these companies are moving towards e-retailing which are likely to be the increment driver in future. Tata Consumer is gonna be a consistent compounder. We still have a buy rating on Tata Consumer. Trent is a long term play given the very high valuation that it commands. Over the last few years, we have seen that the premium valuation exactly continues and they have given consistent 20% plus growth. They should continue to do that in future as well. How are you looking at some of the recent rolls? If you look at some of the recent listings and also include some of the IPOs in the last one year, a lot of these companies are niche firms within their space and some of them were firstly of its nature and that captivated a lot of interest. Another large-scale part is that some of these IPOs are in the midcap space within that Rs 1,000 -2, 000 -3, 000 crore market detonator with an IPO size of about Rs 400 -7 00 crore. It is a usual sugared recognize where you have a huge market liquidity driven rally and there is a lot of appetite for some of these newer, niche corporations and the first-of-its-kind listing fellowships. We have investigated a good deal of demand for such IPOs. The other ingredient is that these IPOs were coming out with good valuations and hence the demand was pretty strong, a case in point the recent listing in the railway segment. Even in the past we have seen some of the better managed railway companies like IRCTC, which is a kind of a monopoly within the rail ticketing platform, has visualized a huge interest even on the IPO post listing and it continues to do well. RailTel is another company which is a play on purvey broadband business through the railway network and that has done well although we do not have a view on that. The MTAR Technologies IPO which kickings off today is a play on not only defence but civil nuclear energy and we understand the numbers being somewhat steady. It is a private firm but a play on defence and we believe it could see steady expansion move forward. The valuations are not that expensive and could see some enumerate incomes. One can look at this IPO from a long-term perspective as well.

Read more: economictimes.indiatimes.com