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Last Updated : Mar 09, 2017 10:56 AM IST | Source: CNBC-TV18

Here are a few fundamental ideas from Mayuresh Joshi

In an interview to CNBC-TV18, Mayuresh Joshi, Fund Manager at Angel Broking shared his readings and outlook on specific stocks and sectors.

In an interview to CNBC-TV18, Mayuresh Joshi, Fund Manager at Angel Broking shared his readings and outlook on specific stocks and sectors.

Below is the verbatim transcript of Mayuresh Joshi's interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal.

Sonia: We have seen a bit of a selloff in the metal names over the last couple of days. Would you use this as an opportunity to buy any of them?


A: You are going to see this disparity happening in terms of how the demand supply dynamics pan out and how inventory levels starts stacking up but as our take goes, aluminium is one commodity which we feel that for the better part and for this fiscal as well should largely remain in deficit mode.

However, Hindalco Industries is a stock that I like. It has gone through a huge commodity cycle upturn of its own but if you look at the dynamics, Novelis has been doing exceedingly well; management is extremely confident that in terms of the free cash flows of USD 350 million coming through in the coming fiscal. They have got capex programme of USD 250 million, top that up with the debt financing of USD 1.8 billion that they have done to the earlier USD 2.5 billion. So that entails huge amount of interest cost savings specifically on its overseas debt that they have taken. Yes, there is some amount of headwinds as far as the cans business goes but as the auto lines are getting commissioned the auto proportion as a percentage of its overall topline for Novelis should be close to 25 percent odd over the next few quarters is going to be margin accretive.

Hence, for the domestic side of the business with accessibility to local coking coal and bauxite mines, the operational costs have become far more reasonable and with the smelting operation running at full capacity, my sense is that as realisations stable over the next few weeks, the kind of contribution that it can have on both businesses; Novelis and the domestic on the EBITDA front can be quite substantial. So you have to pick and choose.

Hindalco is something that I like. I continue to like that but in a staggered manner over the next few weeks is how long-term investors can look at this stock.

Latha: What is the mood on dealing rooms? Are people waiting to go long after the exit poll? Can it have a very big impact? What is the chatter?

A: As far as the exit polls are concerned, there are three scenarios that dealing rooms are panning out with - the street is going with Bharatiya Janata Party (BJP) victory outrights, the market is largely factoring that in, but let us look at the flip side, if the majority does not come through for BJP in a key state like Uttar Pradesh and if the loss of seats is quite substantial, you might see a selloff in the market but if the margin of loss is not that substantial, you might just have a bump down in the market but the recovery can be equally sharp. So the third option is what people are looking at. They are not looking at a substantial loss for BJP even if the loss does come through and if it comes with a marginal margin. The street might very well accept that. So it might be a bump down, if one sees the flip side because the street is going with outright BJP victory but the margin of loss is very minimal, the bump down will be largely bought into very quickly and the market will rebound.

Sonia: Would you buy any paint companies like Asian Paints because of the fall that we have seen in crude?

A: Declines is the way that I look for to it and with the entire remonetisation effects still taking place, the kind of volume growth estimates that one has build in for the second half of this fiscal has got muted down but the recovery can be equally sharp from the first half of FY18. It is largely to do with the kind of repainting demand that is expected to come through specifically from semi urban and rural areas. The finance commission recommendation is one part of the entire exercise but with a good rabi output coming through and once those realisations start coming through on the rural side, the discretionary spending will be quite large. So before the monsoon starts, a lot of prepainting or repainting demand can probably come through and that can drive volume growth from the first quarter or FY18.

However, we are expecting soft numbers to come through for Q4. Yes, there has been input cost inflation coming through for a lot of these paint companies with titanium dioxide prices going up and margins probably getting constraint but the leverage will only come as volumes pick up, which I see happening from the first half. So I maintain positive views, stay with the market leader like Asian Paints but decline is the way I would look at the stock.

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First Published on Mar 9, 2017 09:17 am
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