Like L&T over SBI; cautious on Ranbaxy, Wockhardt: PN Vijay

In an interview to CNBC-TV18 PN Vijay, Portfolio Manager shared his outlook on stocks across various sectors like Larsen and Toubro (L&T), State Bank of India (SBI), Ranbaxy, Wockhardt, (HDIL) and Unitech.

Also Read: Nifty may hit 5400; dollar rise could hit carry trade: Citi Among the two heavy weights L&T and SBI, he is more bullish on L&T and sees the stock touching Rs 1,800 in the next one year. One should approach pharma stocks - Ranbaxy and Wockhardt with caution now given the USFDA issues that these companies are facing. But he is bullish on mid-cap pharma stocks. He expects real estate demand to pick up going ahead, so one can consider buying realty stocks on dips. Below is the verbatim transcript of PN Vijay's interview on CNBC-TV18 Q: The two stocks that got bad reactions in the last couple of days have been Larsen and Toubro (L&T) and State Bank of India (SBI). If you had to pick between the two after the correction which one would you go for? A: I will go for L&T because if you look at the results, they are not too bad. They had a decent volume growth but the EBITDA compression was there. The EBITDA compression was to be expected considering the company was making a strong foray into the international market where the margins are a lot less. Also, there were cost pressures. Given the environment in which L&T is working, the results were not too bad. The book to bill is about 2.55 or so which is decent when you look at the industrial recovery which is so tepid in India. Given these factors, the markets were also slightly turning negative after the humongous rally that we had and that also accentuated the free fall in L&T. So, I would bet for the next one year on L&T because they are very much part of the economic cycle and have handled the downturn fairly well considering their business profile. I would give L&T a target of close to Rs 1800 in the next 12 months. Q: What would you do with the two pharmaceutical stocks that got frontend center of the action on Thursday– Ranbaxy and Wockhardt? A: Both are looking a bit dicey. Ranbaxy for major reasons, we are entering a slightly ugly situation in Ranbaxy. Ranbaxy has not been able to bury their US related issues and that seems to be haunting them and their profitability. Among all the Indian companies, Sun Pharma and Ranbaxy are the most globalised. These have earth shaking effects on the company’s balance sheet and financials. So Ranbaxy, I would put it on a different footing. Wockhardt seems more like a one-off event driven issue. Many pharma companies in India pass through these kind of Fed warnings and actions. So I would not put too much muster on that and would use a fall in Wockhardt to buy into the stock if it was a favourite of mine, though there are slightly better midcap pharma stocks. So Ranbaxy a more serious situation, Wockhardt nothing to bother about. Q: What do you do with the whole real estate clutch now given Thursday's cut on stocks like Housing Development Infrastructure Ltd (HDIL), Unitech? A: Real estate sector being a high beta sector, takes it on the chin whenever we have a crash like Thursday. However, it does give some buying opportunities because one can see over time the rate cycle getting down which means more demand in the real estate. So far if you see, the relatively rate sensitive like automobiles, banking and real estate, real estate is just where it was, Unitech continues to be around Rs 25 and DLF is around Rs 210 and HDIL is around Rs 50.