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Last Updated : Apr 25, 2017 10:23 AM IST | Source: CNBC-TV18

Here are a few stock ideas by Prakash Diwan

In an interview to CNBC-TV18's Latha Venkatesh, Sonia Shenoy and Anuj Singhal, Prakash Diwan of Altamount Capital Management shared his reading and outlook on the market and also gave recommendations on various stocks.

In an interview to CNBC-TV18's Latha Venkatesh, Sonia Shenoy and Anuj Singhal, Prakash Diwan of Altamount Capital Management shared his reading and outlook on the market and also gave recommendations on various stocks.

Below is the verbatim transcript of the interview.

Anuj: We were discussing this yesterday when the numbers came but you would have looked at all the numbers now, what is the call on Reliance Industries Ltd (RIL) at current levels?

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A: The first call was the things are good, it could only improve and I think the numbers have just validated that. People are talking about this disappointment in the petchem, EBITDA and things like that but we need to understand that the company is in constant capacity enhancement either it is augmenting the technology or it is expanding sheer capacity. Today the kind of USD 5 arbitrage between Singapore and its gross refining margins (GRMs) means that this is a quasi-mode that is developing for the company. So even if there is a little bit of short in terms of crude prices and all at least it manages to keep itself in a profitable territory. So petchem, 50-60 percent of the benefit of the capex will come in the next 12 months and the rest is for FY19.

So if you were to start looking at it from a two-year perspective, the catch up that Reliance has started with 30-35 percent upside we have seen in the last couple of months is probably just the beginning of a very strong bull run. It will start getting the Jio numbers. 1,80,000 crore is not a mean number to spend on and recover but why is that profitability starts improving incrementally every day, every month, I think we are giving it a little bit of a sceptical rating and P/E multiple at this current level.

My rough calculation tells me that the price on a core business itself should be above Rs 1,550, the Jio business right now is free now. Some people say it is a loss-making thing, so that is why we are not discounting it positively but if you were to take that on the basis of a rough discounted cash flow (DCF), I think this stock could be Rs 2,000 probably in the next 12-15 months itself.

Latha: Is there more to buy in HDFC Bank and do you see collateral advantage in any other stocks?

A: This is like when you start running out of good opportunities, whatever comes your way and you want to put the bucket out as Warren Buffet keeps on saying but to be honest, there is so much available in that NBFC and banking space and I think the PSU banks are still – the bigger ones, let us not get into this whole long list of midcaps, smallcap banks in the PSU side - definitely offer much more upside in terms of the re-rating that is underway.

HDFC Bank is a comeback that foreign institutional investors (FIIs) have made and that is one of the reasons why you have seen that overzealous buying that has happened. On the fundamentals, a lot of other banks have started delivering incrementally much better value. So I would not read too much into the mood that is changed towards HDFC Bank suddenly.

I would look at some of the other banks and not to say that some of the other banks haven’t done well as well. They have also been amply rewarded whether it is IndusInd Bank, Yes Bank, RBL. Look at small, big, everything is getting amply rewarded. So in that liberal mood that we are in, there could be some better opportunities as well.

Sonia: Lately we are seeing a lot of companies that have an exposure to Maruti Suzuki that are doing very well, the auto ancillaries, whether it is Jay Bharat Maruti, Lumax Industries, Subros etc, the rally has been thick and fast but any stocks where there is still value?

A: Let us look at some of the smaller ones and they might not necessarily be Maruti oriented in terms of their growth so we talked about the Shivam Autotech casually once.

However, what is changing there and I think the quarterly numbers will probably capture that is that they have set up a pilot with Bosch – one is they have got the Rohtak unit already commissioned, Bosch unit if that takes off, they could probably be one of the very few global auto ancillary plays where Bosch has given out that technology and wants to depend on it.

Now given the globalisation that is happening, Indian automobile ancillary units supplying to some of the OEMs across the world will benefit much more because this is one space where China does not compete much, the Latin American markets have slowed down quite a bit, Europe is not competing as much, I would still look at some of the quasi global plays in this and I keep on talking about the likes of the Endurance Tech and Motherson Sumi. So you stick to those, not necessarily just the domestic ones.

This space you cannot write-off so easily as yet just because the valuations have been so stellar, a lot of people have had doubts but I would still be a bit picky but keep myself exposed to the space quite a bit.

For full interview, watch videos...

Disclosure: Reliance Industries, the parent company of Reliance Jio, owns Network 18 that publishes Moneycontrol.com.
First Published on Apr 25, 2017 09:00 am
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