Buy Bata, Tata Motors, avoid cement stocks: PN Vijay

PN Vijay, www.askpnvijay.com, says that Tata Motors is an excellent pick. Tata Motors at current levels is a good long-term pick. Cement remaining so strong is a bit of a concern as a contrarian but if you are holding it you could just ride it, but I would not expect fresh exposures into the cement sector.

Below is the edited transcript of his interview to CNBC-TV18. Q: Public sector banks which have started weakening quite considerably over the last few days on fears of restructuring, farm loan restructuring. Are all those concerns justified, because it’s been very bipolar the performance in private and public sector banks?
A: The bipolar attitude of the markets is to some extent justified. We saw that the last quarter was the worst quarter for the PSU banks, because the Net Interest Margins (NIMs) are also under pressure due to the high cost of deposits.
Right now we are seeing a strong loan growth. Most of them are reporting a fairly good pickup in loans and they are able to get away with slightly higher NIMs. So at the operating level I expect rather robust profits. One should not think that private banks and public sector banks are working in two different countries or something like that. If you go really into the market State Bank and other banks are competing aggressively as ICICI Bank and Axis Bank and HDFC Bank for loans against property, auto loans etc. So from the profitability point of view, the PSU banks are very profitable. However, NPA are a fear. To some extent I don't see any further slippage in restructured debt because what happened in the biggest portion of their restructured debt related to Kingfisher, Global Tele and a few privates which has been sort of led to rest, no further provisions and telecom and power.
In power sector, the government has worked out and is in the process of finalizing a major workout for the SEBs. So I expect some of that would return back in the restructured assets. SEBs are government instrumentalities and carry a government escrow guarantee.
So it's unlikely that they will go bad, but RBI norms demand that they should be restructured. I don't expect any great slippages and but if there is any slippage that would be made up by robust net interest income and loan growth.
So all in all, pricing Bank of Baroda at Rs 660 and giving a fancy price of Rs 350 for Yes Bank to my mind is fairly unwarranted and from that extent if there is a bounce back then the start would be short covering and then investment buying in the PSU banks. Q: What would you do with a space like commercial vehicles? Tata Motors has lost about 15% this month already. Would you buy into the dip or would you be cautious?
A: I would be selective. Tata Motors is an excellent pick. There is no great evidence that the commercial vehicle demand in India has fallen off a cliff. There is some slippage. Similar to Bajaj Auto. The day Bajaj Auto's announced its results the share skyrocketed in a bad market and the same could happen with Tata Motors. The situation on the ground in China, where Jaguar is pushing a strong sales effort is not too bad either. So, Tata Motors is a natural buy on dips.
I won't share that optimism with Mahindra, because they is a real problem. The drought hit areas, especially Punjab and Haryana is the biggest buyer of tractors in India. They account for 75% of tractor purchases and they are bound to see some sluggishness. Mahindra is not a great buy, but Tata Motors around these levels would qualify for a good long-term pick. Q: What do you do with cement? The numbers don’t look too bad from ACC and Ambuja. These stocks have been going up relentlessly. Is there more upside to these names you think?
A: I am not sure there will be more upside, but there may not be much downside. One can say that after the cartel Competition Commission inquiry got completed, that negative is out of the way. They are getting pricing power and in a very vicarious way the failure of the monsoon in many parts of the country has helped the cement demand.
So on the ground, cement manufacturers are pretty cheerful. They are seeing both volume and pricing power. But it defies logic a little bit. One would expect GDP, cement and steel growth to be highly positively correlated. There is no import threat at all in cement.
Cement remaining so strong is a bit of a concern as a contrarian but if you are holding it you could just ride it, but I would not expect fresh exposures into the cement sector. Q: What is your view on Bata after results and does it makes a sense to take fresh position in this stock?
A: Bata is becoming almost Hindustan Lever or an ITC in the way it’s beating all market movements and riding along. There are several aspects to Bata.
Bata is the only solid retail play apart from Titan that we have in the market. That's a huge positive for Bata and the real estate angle can give the punter a bit of a kicker.
The stock has run up a lot. Few months back I was recommending this stock around Rs 550. Operators also play a lot with this stock. Volatility of this stock is quite high. If one want to buy and forget one more FMCG stock, Bata is surely one of them.