Sandeep Shenoy of Anand Rathi is bullish on Tech Mahindra and expects the company to perform well ahead. He recommends buying Divis Labs on dips.
Voltas' consolidated Q4 net profit slipped 91.4 percent at Rs 8.9 crore versus Rs 104 crore, a year ago. Shenoy expects the the stock to remain pressure and it will take some time for company posts better set of numbers.
Tech Mahindra has positively surprised the street with its Q4 earnings and is likely to perform well going ahead as well, Shenoy told CNBC-TV18.
Divis Labs posted 16.75 percent decline in its consolidated net profit, but one could buy this stock on dips, he recommended.
Below is the verbatim transcript of Sandeep Shenoy’s interview on CNBC-TV18
Q: In the infrastructure space, Voltas seem to have not gone down very well with the street. What is your view?
A: Voltas is exhibiting pressure on all fronts. Optically, the profits may have been good but operationally, the profits have not at all been good. You may have seen some kind of an upsurge on a quarter on quarter (Q-o-Q) basis, but people are now beginning to have doubts whether structurally the model of these companies are under question mark. Pressures are there, be it on raw material front, on costing front, on the metals and the materials front as well as on man power front and realisations are not taking up at all.
Last but not the least, even the working capital elongation as well as receivable elongation is hitting all these companies. Voltas being in electro mechanical (MEP) space is bang at the receiving end of all these problems. So, it is going to be quite some time before the numbers will again come back to the levels. We feel for a longer period of time it may not come back to the heady levels of 2007-08.
Q: What about Tech Mahindra, this one has surprised with its numbers on Wednesday- does this goes down as a hit?
A: Both on the top line front, on United States dollar (USD) as well as Indian rupee (INR) front, this company has managed to give some kind of positive surprise. The dogma of this company was overdependence on one client and one vertical and that is slowly and steadily easing. Soon that front, it has been given thumbs up by most of the markets.
After the large forerun, if you exclude Oracle, this is one company which is always so near yet so far for most of the investors. But on a consolidated basis, after a three year of pain, the company is exhibiting signs of what it used to be before the merger or the acquisition took place. So somewhere down the line, this is one company which has all the ingredients of posting surprises on the positive front and the act is falling in place.
Q: What’s happening with the midcap end of trade through Wednesday and this morning? Do you sense a lot of nervousness amongst traders because of what has happened with individual stock positions?
A: Over expectation had come there. As you mentioned earlier, when you have some kind of buoyancy, liquidity flow directed towards the market like ours, we always talk about our markets having some depth it doesn’t have compared to the other larger markets. The flows were good, but the index stocks performed much better than the second and third rung stocks.
When the money flow goes on the reverse gear, the index stocks will manage to hold on to it but there could be carnage in the second and third rung stocks. We are seeing the first act of that reverse flow. So, one has to be careful. The pain could be going on for a much longer time.
Q: On the pharmaceutical side, Divis Labs is usually a good performer but this quarter’s numbers did not look great, what is your view?
A: I don’t think it is more to do with any impact on the business model of the company. It is more due to the high base effect of the last time and some issues at the operational front. You could have power outages and all those reasons which are impacting most of the industries in Andhra Pradesh (AP). Also, there was some misstep on forex front.
Overall, this is one of the more bullet proof company but indecipherable business model, it is not an easy business model to decipher and take a call on. But yes, consistency of earnings has been the hallmark of this company and somewhere these kinds of shocks come in so it should be constituted more of a dip which has come and viewed as an opportunity to enter rather than anything else. Yes, it has been a miss but then you can view it as an opportunity also.
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