Airtel, Idea top telecom bets; like Britannia: PN Vijay
Britannia continues to be a buy for midcap investors. Bharti Airtel can be bought from a 12-18 month timeframe, recommends PN Vijay.
In an interview to CNBC-TV18, portfolio manager PN Vijay shared outlook on stocks across various sectors.
Below is the edited transcript of PN Vijay's interview with CNBC-TV18Q: Britannia Industries went up 16 percent perhaps to do with the restructuring of management or results. Have you taken a look at that and whether it merits a buy?A: Surprisingly, Britannia is not talked about often, not even as much as Colgate Palmolive. It has been a consistent performer. In terms of valuations Britannia has had a major discount to some of the majors, for example ITC or Hindustan Unilever (HUL) or somebody with that brand power. Britannia is nowhere.It has tremendous brand power in bakery and the dairy business. After results and restructuring, it is catching up to some extent. I do not think for these types of companies one should bother too much about restructuring. They do not translate into any great management change. There are more executives moving around. I wouldn’t pay much heed.In the case of Britannia the issue is raw material pricing as it sources most of its material - wheat flour, sugar and milk. Variations in this can have a major impact, a bit like Nestle India, because its product prices are severely competitive. However, Britannia continues to be a buy for midcap investors because of strong brand power, brand loyalty and capacity to introduce new products across bakery and dairy ranges.Q: A lot of the Anil Dhirubhai Ambani Group (ADAG) stocks have bounced back, would you buy any of them from an investment perspective now?A: Taking a longer term view, Reliance Infrastructure could be the one. Reliance Communications has run up a lot and in that sector we prefer Bharti Airtel and Idea Cellular. Reliance Power has problems of project implementation. They are getting things completed, but it is a risky stock. Reliance Capital is surely not our non banking financial companies (NBFC) favourite. That leaves Reliance Infra where business model is good. Distribution, transmission, and exploration and production (E&P) have been contracted.Over the last two years, the company has progressively gone into contracting, which is a sound and profitable business. The stock has also corrected a lot. It is not one of our top picks, but if one had to pick among the four, Reliance Infra would be that ADAG stock.Q: The only surprise in terms of earnings has been Tata Steel. How would you approach that?A: Not too positive because the macros are having problems. Corus did come out with some surprising numbers. Sustainability of that is an issue and domestically also steel is not looking up. It is very much linked to industrial activity, industrial production etc. On all these factors we are negative on the entire metal space including ferrous where we were a bit bullish sometime ago.Q: Your views on Bharti Airtel because that turned volatile in the last few days? A: Most problems of telecom industry are getting addressed. It seems to be a good long term buy. The big picture is that competition is reducing. They are increasing prices across the board including Reliance Communications.Therefore, the margins would go up and average revenue per user (ARPU) would go up. Once again the emphasis is on a good long-term buy, on a 12-18 month timeframe. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
