HCL Tech, Sun Pharma, Ceat are good buys: Sharmila Joshi

In an interview to CNBC-TV18, Sharmila Joshi of Peerless Securities, says the two most important events to look forward to next week would be how FII flows and the rupee behave.

According to her, the only IT company that seems to have gained from the rupee depreciation is HCL Technologies. She advices keeping a target of about Rs 880-900, and buying it below Rs 800.
She is also bullish on Sun Pharma, expecting a 10-15 percent kind of an upside from current levels. She also has a buy on Ceat with a target of about Rs 141.
"PVR is another stock I would like to go in for with a target of about Rs 400, with a slightly six-seven months perspective," Joshi told CNBC-TV18. Also Read: Hold Reliance Industries: Parag Doctor Below is the verbatim transcript of Sharmila Joshi’s interview on CNBC-TV18 Q: In your mind which is the most important event next week that could be a trigger for this market either way?
A: I think the foreign institutional investors (FIIs) flows because ultimately the proof will lie in whether we are seeing the return of flows back to our markets. That and the way the rupee behaves because clearly we have seen that even intraday when the rupee starts depreciating you see markets trading a little lower. So those are the two key things to look for. We have seen some improvement, are we able to build on that in the coming week as well as how the rupee behaves. Q: Tell us about HCL Technologies, would you advice buying it now in the run up to the result if somebody doesn’t own it already and are you watching out for any kind of target price on the stock?
A: You can buy if you see markets open on a very positive note on Monday and IT bidding on the gains. Otherwise it is better to wait for somewhere closer to Infosys numbers or some of the other major IT numbers.
The reasons why I like the stock are pretty much the same, the kind of earnings per share (EPS) growth that we have seen. Also, what we have seen is interestingly that the rupee depreciation seems to have shown in a favourable way only in the numbers of HCL Technologies. So there, you immediately see that one percent drop in the rupee getting reflected directly in their EBITDA margin. That is one of the key reasons for liking HCL Technologies over some of the other stocks at this point in time.
Again in terms of valuation, it looks better placed than a Tata Consultancy Services (TCS) or an Infosys for that matter at the moment. So I would go into the stock with a target of about Rs 880-900, but I would like to buy it below Rs 800. So I would wait for it to correct a little bit more from here and then look to enter. Q: You have picked up Sun Pharmaceutical Industries which is an equally good looking stock, what kind of a view do you have on that one?
A: The idea was to have some kind of an exposure to defensives. Also what worked well for Sun Pharmaceutical Industries in this last week was the fact that they decided not to go ahead with the buyout that they were planning simply because of the way the rupee has depreciated. So you saw the stock run up a little. So, given all things, the way their earnings have been, the way the kind of growth that they have been doing and the kind of results they have been delivering, I would expect a 10-15 percent kind of an upside from current levels. If you can get it cheaper,
if you do see a sell-off coming in that is a good time to enter. So when you see those kind of draw-downs in the market, these are the stocks that we should look at rather than look at some of the high-beta names. So the toss-up to me was to choose between a Lupin and a Sun Pharmaceutical Industries, Cipla is also again a stock that I like which has seen some buying coming in the last week. But I decided to go ahead with Sun Pharmaceutical Industries. So that is the stock that I would buy. Q: Before we see that downtrend resume, just purely for a shorter-term trading call or even an investment call, any other stocks that you would want to recommend in the midcap space that look attractive at these levels?
A: Certainly. With a slightly longer-term horizon and with a good entry point, you can look at a stock like a Ceat because if you are looking at it in terms of valuations, it is available at a very reasonable level. Again the way the rubber prices have moved and they are expected to stay within this range. So this commodity prices coming down has worked well for all tyre companies and we have seen the improved numbers from Ceat. So given that we have a buy on the stock with a target of about Rs 141. Q: What do you think about PVR?
A: If you look at the way the stock is placed – PVR has consolidated its position over there, apart from the Cinemax buyout, they bought out another theater in the Delhi area. Again the kind of cost rationalization they have done means that they will see better margins going ahead. If you look at it, I was just reading an article, which was very interesting and which has struck me – if you go to a theater, you will realize that the interval time is now much longer because they are giving you ample time to go out there and buy your snacks etc because that is obviously the place where they are making greater margin. So that is a strategy that seems that these people have put in place because obviously the ticket sales don’t get them the kind of margins that they get on food and beverage items.