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Last Updated : Aug 01, 2016 11:03 AM IST | Source: CNBC-TV18

Here are a few stock ideas from Ajay Bodke

In an interview to CNBC-TV18, Ajay Bodke, CEO & Chief Portfolio Manager (PMS) at Prabhudas Lilladher Pvt. Ltd shared his readings and outlook on market, specific stocks and sectors.

In an interview to CNBC-TV18, Ajay Bodke, CEO & Chief Portfolio Manager (PMS) at Prabhudas Lilladher Pvt. Ltd shared his readings and outlook on market, specific stocks and sectors.

Below is the verbatim transcript of Ajay Bodke’s interview to Latha Venkatesh, Anuj Singhal & Sonia Shenoy.

Sonia: Do you expect to see pressure on Larsen and Toubro (L&T) today post the earnings that we saw on Friday?


A: I heard the concall and I believe that the outlook that the company has given in terms of the sales growth, margins as well as the order inflow, remains very much intact. However, what was really bothering all the analysts is the continuance of the provisions that the company has taken on the credit loss, and there the company did hint that the kind of provisions that we saw on credit loss should continue going forward.

However, one has not seen any improvement in the working capital front and that is why we have cut our earnings per share (EPS) for FY17 and FY18 by 8-9 percent, but the fact that the company remains steadfast on its guidance for FY17, will provide a good downside to the company. The stock should remain range bound with 3-4 percent downside, but the upside certainly will get capped in the near-term.

Anuj: What about the other piece in the puzzle, ICICI Bank? How do you expect that stock to perform from here?

A: That is a real shocker. Initially when the numbers came in, there was a belief that the gross non-performing assets (NPA) did look at tad higher; a very marginally higher than what they had posted last quarter. However, when the slippages numbers came in, that took everyone by surprise, Rs 8,200 was a very high number to grapple with and also, the sale to asset reconstruction company (ARC) number was very high. So, in my opinion, corporate focused banks continue to remain extremely weak; Axis Bank's numbers were also very weak followed by ICICI Bank. Therefore, I would advise investors to stay away from corporate focused banks; they have had a good rally.

Continue to look at retail focused banks which have posted stellar numbers. If you look at HDFC Bank, IndusInd Bank and Kotak Mahindra Bank, they stand out and also the outlook that they have given, makes them stand head and shoulders above these corporate focused banks. The only exception here being Yes Bank, which continues to outperform its peers and post pristine asset quality. So, Yes Bank, HDFC Bank, IndusInd Bank would remain my top recommendations with a medium-term perspective.

Latha: Some of the consumer goods have done well like Crompton Greaves Consumer Electrical, Force Motors, if you can bring it there, Nilkamal, any of these midcaps that stood out for you, these and others?

A: The consumer sector, if you look at it, it is a story of contrasting halves. If I look at some of the paint companies, some of the home improvement companies, the kind of double digit volume growth that they have posted, Asian Paints, Kansai Nerolac Paints on the decorative side clearly points to a strong surge in underlying demand, but when you juxtapose that against some of the fast moving consumer goods (FMCG) companies like Hindustan Unilever or Dabur India, which have shown only 4-5 percent volume growth, as against 6-7 percent that the analysts were expecting and also the fact that they are holding out the hope that post harvest, October-November with bountiful monsoons, volumes should pick up. So that is the dichotomy that one faces.

We have one part of the consumer sector which is showing buoyant volume growth but at the same time in both these areas, one is seeing price deflation which is holding back from a strong revenue growth. So, one will have to wait only after the monsoons and see whether the part that is ailing, the Levers and the Daburs of the world will be able to catch up on volumes and will be able to pass on price increases.

Sonia: Wanted to ask you about some of these stocks in the pharmaceutical space. Good numbers from the likes of Narayana Hrudayalaya, Dr Lal PathLabs, Alembic Pharmaceuticals. What is your top call there?

A: There Jubilant Life Sciences, Aurobindo Pharma and Glenmark Pharma are the three midcap names that we are constructive on in the medium-term and both of them have strong drivers, a lot of lunches in the US on the anvil for all three in FY17 and the valuations in case of Jubilant and Glenmark look very reasonable.

The stocks have had correction; over the last six months all the pharmaceutical stocks have underperformed and as the market is scaling new highs, I believe that some amount of reallocation will start happening towards the underperforming sectors which are expected to show a decent earnings growth over the next couple of years.

First Published on Aug 1, 2016 09:25 am