In an interview to CNBC-TV18, Mayuresh Joshi, Fund Manager-PMS at Angel Broking spoke with Latha Venkatesh, Sonia Shenoy and Anuj Singhal of CNBC-TV18. He shared his reading and outlook on the market and also gave recommendations on various stocks.
Below is the verbatim transcript of the interview.
Latha: There were bunch of other numbers other than Yes Bank and IndusInd Bank that came out yesterday. Were you impressed by Jay Bharat Maruti?
A: Yes, the numbers seem impressive on the face of it but how the market behaves; will predominantly happen on the global headwinds, the French elections for example, will have a say in terms of the market volatility going forward but key numbers that are expected today, will give a direction in terms of the IT sector, Cyient, Mastek, Mindtree coming out and from the metal space Hindustan Zinc. So, largely the market is of the opinion that Q4 is going to be soft and tepid for IT for a few of the banks as well. Therefore, it's going to be a stock specific approach in my opinion.
Anuj: What are your two picks for the day?
A: If one goes with the logic that the market do correct and show sign of weakness and if these stocks correct 8-10 percent, they become good buying opportunities. The first stock is VIP Industries. It's the market leader in luggage space, Rs 6,000 crore is the market space that the luggage industry probably enjoys at this point of time with 55-60 percent being unorganised. So that's one big advantage which VIP have with 50 percent share in the organised market share and with goods and service (GST) coming through, it could be a clear beneficiary. The other important aspect that comes through for VIP is asset like model; the entire outsourcing comes from China and the currency impact also looks very minimal considering yuan and rupee equation on that front. The working capital requirements are very minimal and they have got superb control on inventory and debt levels which gives rise that their debt equity levels are absolutely low on their balance sheet, dividend yield is in the excess of point percent and looking at how crude prices are behaving at this point of time, polypropylene which is one of the raw material used for hard luggage. I think you will see some softness there which will ensure that the margins are maintained around 10 percent trajectory. So a very robust topline and bottomline growth and we foresee a substantial upside from VIP if one holds for next 15-18 months.
However, from the banking space there is inherent signs in terms of corporate facing balance sheets with watch list and Karur Vysya Bank has a significant exposure to the corporate side in terms of the textile segment specifically which had taken huge toll in terms of their asset quality, the gross non-performing assets (GNPA) has increased significantly, the net NPA ratio increased significantly to 1.55.
Sonia: Karur Vysya has already rallied 50 percent since December. Don't you think most of the juice is out or you expect more?
A: I do expect more and the whole point is that if the stock corrects then it becomes a good buying opportunity but the entire premise here is that the kind of credit growth that we saw in FY17 of 3.3 percent, largely should get arrested at the end of Q4. As credit growth starts resuming to the system as a whole, Karur should benefit and the kind of stress that we have seen on the corporate side, should reduce significantly and the credit cost that they reported of 130-140 bps should start coming down. If they cannot start coming down and normalise around 65-70 bps, the kind of accretion that it can have on earnings on return on assets (RoAs) and return on equity (RoEs) can be quite significantly. So if the stock corrects it becomes a good buy.For entire interview, watch accompanying videos.