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Last Updated : Oct 09, 2015 03:10 PM IST | Source: CNBC-TV18

Positive on private sector banks: Nischal Maheshwari

In an interview to CNBC-TV18, Nischal Maheshwari, Co-Head, Institutional Equities & Head-Research at Edelweiss Securities shared his readings and outlook on the upcoming earning season.

In an interview to CNBC-TV18, Nischal Maheshwari, Co-Head, Institutional Equities & Head-Research at Edelweiss Securities shared his readings and outlook on the upcoming earning season.

Below is the verbatim transcript of Nischal Maheshwari’s interview with Latha Venkatesh & Sonia Shenoy.

Latha: What should you expect from Infosys itself and the IT space? Do you think it will usher in a positive result season at all?

A: Infosys, at least we believe, they are going to surprise the market. We are looking at on a quarter-on-quarter growth of around 4 percent. The market is expecting somewhere around 3.8 to 4 percent. We believe that would be definitely positive if any where north of 4 percent, Infosys is able to deliver. Overall I think there will be challenges in the IT space itself, there would be companies like Infosys which will do better than the others.

Sonia: Last time when the Infosys came out with their numbers since then and now the stock has seen a very good performance all the way back to the Rs 1,150 marks. If we do get a surprise in this quarter’s performance as well what do you see as the upside for Infosys and what would your pecking order in the IT space look like now?

A: From the last quarter to this quarter the stock is more or less flat basically. If I look at the numbers basically, I think anywhere from Rs 75-80 earnings is what most of the people are. So, if I do calculation then 20 times is what Infosys should be trading if it goes up another Rs 50 from here. So, I think between Rs 1,200-1,300 is where Infosys can go up if it delivers this kind of a result.

From then onwards I think it cannot be having a better multiple than Tata Consultancy Services (TCS) which is already quoting at around 20 times.   This is what I believe that the limited upside; but definitely what can drive the thing is lot of fund which have been still underweight and have been watching Infosys for now two–three quarters. So, if another good quarter comes in I think a lot of shifting will happen from TCS to Infosys and that may drive the prices up.

As far as our pecking order is concerned I think Infosys is up there, and then we have Tech Mahindra, TCS and HCL Tech.

Sonai: What about the other stock IndusInd Bank? That comes out with its numbers today and will kick start the earnings season. It has been a great quarter for IndusInd Bank, the last couple of quarters and this time also numbers are expected to be good. How are you positioned on that stock?

A: All the private sector banks we are positive. We continue to maintain a buy but specifically IndusInd Bank I do not have the numbers with me, what our expectations are on that? However, we are positive on all the private sector banks.

Latha: What else would you start positive on before the result season? From your company’s analysis where are we going to be positively surprised?

A: Two spaces look good to me. One is the banking space. Even the public sector undertaking (PSU) banks are going to give you a surprise this time given that 50 basis point cut has happened. There is going to be good amount of profits on the available for sale (AFS) portfolio for most of the PSU banks. That is going to give surprises to people.

Again the other space which looks still good is the consumption side. So, be it autos, be it fast-moving consumer goods (FMCG), those guys are still going to continue to show good traction as far as top-line and the bottom-line are concerned. The other space is which may do well is the utility space where margins should improve going ahead given that the commodities have come down.

Sonia: Do you have a view on the logistic sector? I am just springing this up because this is news that has just broken a couple of hours ago where Transport Corporation of India (TCI) has decided to go in with a de-merger. The stock is up almost about 15 percent odd now. Have you tracked that story?

A: No, we do not have that stock under coverage. In the logistic space we have only one or two stocks, Container Corporation of India (CONCOR) to be specific where we have coverage.

Sonia: Is there an expectation of a good quarter for many of these logistics companies?

A: Some of them like a Blue Dart, Allcargo Logistics, CONCOR some of these companies will do well and especially which are more aligned towards the e-commerce space. So, Blue Dart definitely, I don’t know how much TCI gets its business from e-commerce. However, the underlying thing is the e-commerce space, which is still doing pretty well. So, logistic companies which are aligned towards the e-commerce space they are going to do well.


Latha: You said you will load up on privates sector banks, any other space?

A: I said PSU banks, private sector and then the domestic consumption.

Latha: So all your Emami, Dabur, Marico all of them will be positive?

A: FMCG and auto, to an extent the telecom has also been beaten down quite a bit. I think both these stocks Idea Cellular and Bharti Airtel looks a good trading bet. I am very specifically saying trading bet because Reliance Jio is around the corner. So, these stocks since they have beaten down so much I think they also look a good trading bet.

Sonia: What are your top picks in the pharmaceutical space this time and where are you bullish on in terms of earnings this quarter?

A: Earnings and stock may be different basically as far as pharma is concerned so our tops pick still continues to remain as Sun Pharmaceutical. We believe that there is huge amount of synergy which Sun and Ranbaxy merger is going to get created. Obviously the immediate quarter is not going to be showing that.

However, on a long-term basis given that the stock is corrected almost 30 percent from the top and the merger is going through and it has its own plans. However, that is our top pick as far as the pharma space is concerned. Pecking order is Dr Reddys Laboratories and Lupin followed by that.

Latha: Finally over all what will be the earnings growth call at the end of the results quarter? What are you working with in terms of an earnings growth and are you ahead of the consensus, are you above the consensus, below the consensus?

A: I have not looked at the consensus unfortunately but still the current quarter doesn’t seem to be better than what happened last quarter as far as topline is concerned. We are still seeing a negative topline growth on my coverage universe, a negative almost on a year–on-year basis of around 3 percent. If I look at ex- OMCs then I have a positive bottom-line on my coverage. Coverage is almost 85 percent of the market cap.
First Published on Oct 9, 2015 11:15 am