Upbeat on consumer durables, like Hitachi Home: Altamount

A: I would believe that they have been ignored for a bit too now. We had strong run last year when people started realising that consumption is going to be a theme that will take off. So, there is a lot of interest and that kind of towards end of the calendar 2014 it kind of started tapering off. My sense is that the earnings would start improving now with the fact that the margin expansion will also start reflecting thanks to the input costs coming down.

As a sector it is very promising and this entire story of 100 smart cities and all which is going to be in a very different phase of consumption for these products is going to be extremely positive. So, my sense is it is time to look at them again and selectively you could look at some of the best players out there and they still seem overvalued but I think earnings growth will justify that very soon.

Sonia: You have picked up Hitachi Home but that stock is already up 500 percent in the last 12 months. Is it just the start of a multiyear bull phase for that stock you think?

A: Absolutely, what happens is the last five years there was a decompression of earnings and the topline never grew beyond about single digits. What is happening is, these companies not only have a catch up of shorts on the growth phase but they also have a huge product range that leads to a lot of margin growth that they will be able to imbibe. Most of these players have designed element coming from the international parentage and that is where they are kind of introducing faster, smarter products, fuel efficient products, energy efficient products and that is actually going to be where people are willing to pay a premium. You look at the way window AC to spilt AC has happened as a transition, the way top loading, front loading washing machines to the semi automatic washing machines to the automatic. So, these changes are extremely good for margin growth for these companies and that is where I think they are going to be extremely promising.

Sonia: It is very interesting to see you have picked up JSPL in your buy list. That was the big dog of 2014, you see a turnaround story there? A: If you see the price action in the recent times very clearly it seems to be that people have accepted that the damage has been done to the extent that any improvement on the coal auction side would help them come back which is one of the reasons they lost this entire ground. Also the penalty issue which is still hanging fire could start abating if they were to get some sort of a respite which is likely. On the same time the ordinance for the mining side which could improve even the steel business for them, so all in all, power, steel everything put together they could come back or come out of this entire mess in a way that is fairly impressive. My sense is you could see a little bit of consolidation go for the next of couple of months and then the stock could move up very significantly to catch up with the other peers.

Sonia: You spoke to us about a lot of stocks, there is one interesting stock you have picked out that we have never discussed, Forbes & Company, tell us why you like that story? A: I was quite surprised to discover this stock and that was more of an accident. This stock is virtually into everything that is mouthwateringly attractive today. It is into infrastructure, railways, consumption, products, it is into the product which all of us know and that is Eureka Forbes. If it were to be the holding company of this branded well established product you can imagine a small company called Luminous recently in Gurgaon where multiples which is the venture capital company along with CLSA invested Rs 100 crore and a valuation which is phenomenal. If Luminous could get Rs 280 crore valuation which is just a new entrant into the product, Eureka Forbes could derive much more. The market cap of this company today is just Rs 2500 crore. If Eureka were to be set off as an IPO it could fetch much more than just a market cap of the entire company and that is exactly why nobody who owns this stock is willing to let this go and that is a liquidity issue; people are not willing to sell the stock that they won but if they were to be patient and nibble into the stock it is going to be a multibagger definitely in the making.Reema: The stock seems to have caught the investor fancy about a few months back when it rallied from Rs 500 to Rs 2000, what could be the potential upside?A; It is difficult to put a number right now because as I said if Eureka Forbes were to get hived off as a separate business it could fetch anywhere between Rs 5500-7500 crore of market cap, it is such a promising business especially not only the product sale but the AMC contract fetched them a lot of money as well. It is a well established thing. Not only that, they have a lot of land bank which is not monetised yet. Shapoorji Pallonji is one of the largest land bank owners across the national level if you were to take large warehouses, all of them which they have been into traditionally. So, I think it is a great company, just that holding companies usually don’t attract attention and they always trade at a discount but there is a huge discount to what inherently this company is valued at.Sonia: How to play this crude theme, any stocks that you would put some incremental money because of the way crude has fallen again? A: I am of the belief that crude could start reversing itself now. This fall has been pretty sharp, pretty deep and if one were to look at that kind of an up swing which comes back you could probably look at going long on Cairn India because that is a direct proxy to this entire move. Cairn also has certain positive triggers that could fetch it up. However, I don’t know how many people believe that crude would continue falling down but my sense is that crude probably is bottoming out. You are not able to catch the bottom exactly but things could start looking up and crude could start moving up 15-20 percent from here in the next quarter or so.Disclosure: The stocks that we have discussed today, I don’t have any personal position but we do keep on recommending these to clients.