Mayuresh Joshi, Fund Manager, Angel Broking, is gung-ho on Maruti and Hero MotoCorp in auto and RBL Bank among private midcap banks. 65221935 65213681 65198572 Edited excerpts: What is your view on Tata Motors? Would you be contrarian in the market and buy the stock at lower levels because when things turn, they can turn pretty quickly? Looking at numbers and performance of JLR, in terms of the destocking effect that has taken place along with the imposition of import duties for the Chinese operations, negative operating cash flows that they reported along with increase working capital requirements both for the standalone operations and JLR. All that dented their EBIT margins on the JLR front though the domestic operations probably have held up pretty strongly. In a scenario like this, it becomes very difficult to comprehend when the recovery will take place and the assumption is that the normal destocking effect should reverse over the next few months in terms of both reported numbers as well as expectations in terms of the pickup that you are seeing with the new launches – whether that is I-Pace or the Velar SUV. On that front, if the stock corrects, it will look attractive but the stock might go into a prolonged consolidation phase. Again, within the four-wheeler pack, Maruti probably has been our preferred pick over the last few quarters and it will remain so in anticipation of volumes remaining strong. The input cost inflation that you witnessed for all auto companies in general should probably start abetting in terms of price hikes that the companies will take and again the leadership position that it has along with the fixed cost absorption of its Gujarat plant should propel earnings. With expectations from the auto universe as a whole, the four- wheeler should have a reasonable show this time around. Within the two-wheeler pack, there should be a very strong showing in terms of discretionary demand specifically on the rural side. With the axle load norms coming through, you might have some amount of disruptions over the next couple of months in terms of MHCVs, particularly though LCV sales holding up. A trend of volume degrowth could be seen. I expect auto companies to report a reasonable set of numbers but I will remain specific on Maruti within the four-wheeler pack and a Hero MotoCorp within the two-wheeler space.What is going on with the PSU banking pack? While BoB was a great performer both in terms of earnings and price action, we cannot say the same for Bank of India. Clearly, asset quality continues to remain under stress. It seems that one has to be selective within PSBs. What would you say is a conviction buy right now? So, of the PSU banks’ numbers were very encouraging. What Canara Bank reported in terms of absolute numbers was a very encouraging sign. The numbers reported by Bank of Baroda and the kind of granularity that we are seeing, specifically in terms of retail advances picking up and the kind of stability that one expects on the GNPA as well as net NPA fronts, slippages coming down, the provisioning actually being far more stable, it makes sense to be selective. So, State Bank, Bank of Baroda fit in top-tier names. Vijaya Bank had a good show within the midcap names with the overall stressed book at 7.8%.Tier one ratios will probably remain strong, leading to strong earnings momentum and improved return ratios over the next few years.Are you recommending to clients how to differentiate in opportunities within the banking space? You have spoken about banks at large but is there an opportunity that you are staring at within the regional banks space? Do you think Bandhan Bank, RBL Bank are on their way to becoming biggies? In terms of trends, banks like a Bandhan and RBL will show tremendous growth because of the low base that they are working on. Again, banks like RBL is something that I will remain extremely optimistic about over the next few quarters. They are building up a very healthy CASA franchise.We need to talk in terms of stability in terms of asset quality that is probably getting displayed. A few portions in terms of their agri loans is where the stress still remains. That has been taken care of in terms of sufficient provisioning. What we have also seen in terms of the advances growth is the kind of capital adequacy that RBL possesses at this point of time.I will not be surprised if they keep on posting a very strong momentum on the top line in terms of advances growth reflecting in NIIs. That will reflect on how their NIMs will spread out. NIMs should be far more stable going ahead. Credit cost should start coming in and dwindling down. Within the private midcap banks, RBL Bank remains our top pick.Emami, Exide and Tata Global are all slated to report their numbers today. Is there anything you are looking out for particularly? For Emami, in particular, the volume growth should be pretty strong specifically on the low base. The other element in terms of input cost inflation that we witnessed in a lot of FMCG companies, they have been successfully able to pass that through with small hikes undertaken. The third element is the wholesale dependence that has come down significantly. On the last quarter, it was 38% with retail reach at almost 0.85 million compared to 0.73. So, premiumisation of products and leadership across categories should be sufficient to drive volume-led growth as discretionary demand starts coming back. Valuations may be on the higher side but Emami probably is still not too high. Emami should stand out and even Exide’s commentary would be very interesting. With lead prices coming off, you expected to see in terms of both OEM and replacement demand holding up along with the industrial segment picking up steam over the next few quarters, can have a say in terms of their EBITDA margins and reflect on their ROEs. These two results will be very interesting to watch out for.
from The Economic Times https://ift.tt/2O1spDd
No comments:
Post a Comment