Ranbaxy looks best in terms of valuations

CNBC-TV18’s Executive Editor, Udayan Mukherjee - In autos, it’s easier to build the valuation case. They have got goodies from the Budget; more cash to spend, excise cuts and their valuations are good. Maruti is trading at 11-times next year’s earnings. That is a very tempting valuation in a market, which is trading at 16-times. Tata Motors valuations are quite compelling as well. If we look at two-wheelers both Hero Honda and Bajaj Auto are trading between 14-15 PE multiple again a discount to the market.
 
So they have got good news flow, they are under owned and they have got reasonable valuation. So they could run for a bit more. Not to say that they will lead the market out of the woods but they could run for a bit more.
 
In pharmaceuticals, the best stock, fundamentally, among the largecaps probably is Sun Pharma but that too after the recent move up has gone upto 22 kind of PE multiple. So it probably doesn’t have much by way of valuation headroom left but it’s a fantastic stock on quarterly delivery. Cipla is also now because of it’s poor and depressed earnings trading at 20 plus PE multiple on FY09.
 
So that too probably does not have too much by way of valuation headroom. The one stock, which is being the big dog in the market probably, looks the best in terms of valuation, which is Ranbaxy. The FY09 guidance is reasonable and the stock is still trading at 14-times, which is a 10% discount to the Sensex multiple.
 
So amongst the largecap space Ranbaxy in the pharmaceuticals space probably looks the best in terms of valuations. But there are many midcap ideas, which probably people might chase because they look quite tempting as well.