In an interview to CNBC-TV18, Prakash Diwan of Altamount Capital Management shared his readings and outlook on specific stocks and sectors.
Below is the verbatim transcript of Prakash Diwan's interview to Latha Venkatesh & Sonia Shenoy.
Sonia: The stock of the last couple of days has been Divis Laboratories. It's almost 40 percent gone in two days. Do you at any point look to exit the stock if you are a long-term investor or stay Put, buy more. What do you do here?
A: My sense is that exit could have happened if it could have got executed on the first day when things started looking bad but in hindsight everything looks very perfect. At that point of time there was no way you could have anticipated such a deep gash but the confusion still reigns supreme here; it is a classic example, it remind anecdotally of what Lupin went through when the Goa facility was inspected and there also the management put up a brave face saying things would get back to normal and it took time and it still hasn't come back to Rs 2,000 level. Therefore, the point is, if you are a patient investor you will define that patient pretty well this time because it could take much longer to this.
The important trigger now is that the import ban or the alert on the import, if that takes away a lot of steam then you have a problem in terms of recovery but you will go through a time correction, not necessarily any price correction any deeper from where it is but if the import alert doesn't come through then the recovery could be swifter.Latha: Balkrishna Industries - why is it shining?
A: This has a simple corollary; this does not sell anything to two-wheelers and passenger cars. This is off-road tyres and off-road radial is a very high margin business.
Latha: It doesn't have Chinese competition?
A: Technologically they are far more superior and they are closer to the Japanese players who produce out of Europe. The Chinese have not been able to master this because these are not mass production. It is like why the Chinese have not gone into textile and garments because you cannot have one design and one million pieces.
However, here a lot of customisation has started coming in because it is made to order kind of batches and the revival in the US is also going to be very big positive for this segment. It hasn't yet percolated to Balkrishna Industries Limited (BKT), but this company setup a processing unit which got the economies of scale and that has been the key trigger.
Latha: You like it even at this price?
A: You will start seeing liquidity dry out in this counter and nobody is going to be selling it. It is getting into that pricy premium, so nobody is going to be exiting, so you will only have to keep on buying it, nibbling into it at levels which are reasonable enough but I do not see a selloff happening and in India out of the listed players this is the only company. There is another unlisted company in this segment, actually promoted by the same people who originally had Balkrishna Industries as a company.
Sonia: From the heavyweight, in the month of December two stocks that are good franchises but have corrected 15 percent - Asian Paints and UltraTech Cement. Would you buy any of these stocks now?
A: UltraTech Cement certainly. Cement is giving a chance because this was a lean phase and this whole demonetisation bugbear has brought down valuations so significantly. However, quietly and swiftly UltraTech will seamlessly get into the Jaypee's assets also and once that kicks in, which will probably be in the middle of calendar '17 or the latter part, but the way UltraTech has now poised, any pickup in demand in terms of infrastructure spend whether its lead by the government and not necessarily by the real estate segment, it is going to be very beneficial. Therefore, I am positive on UltraTech certainly.For entire interview, watch accompanying video...
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