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Last Updated : Jan 31, 2017 01:42 PM IST | Source: CNBC-TV18

Here are a few stock ideas from Rajen Shah

In an interview to CNBC-TV18, Rajen Shah, Chief Investment Advisor at Tradebulls Group shared his readings and outlook on specific stocks and sectors.


In an interview to CNBC-TV18, Rajen Shah, Chief Investment Advisor at Tradebulls Group shared his readings and outlook on specific stocks and sectors.

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

Sonia: Your thoughts on the telecom space. You think there is more juice left here or do you think that once the Idea Cellular-Vodafone merger, if and when it goes through, it could restrict profitability of the other companies like Bharti Airtel etc?


A: The consolidation of Idea and Vodafone is very positive for the industry because we will have three big players in the industry, so probably after a fierce battle, which is going on currently, maybe after a year or so the three could sit-down and work out a deal whereby no more blood battles. Therefore, it's positive. We also need to understand one thing that just as we have air and water without which we cannot do, three or five years down the line we will not be able to do without internet and data. However, we have seen Bharti Airtel reporting 50 percent plus drop in profit, the stock has not come down, in fact it has moved up. So rerating of PE multiples will keep the stock at a higher level and Reliance is the biggest story which is going to unfold, so we are extremely positive on Reliance in this space.


Latha: Is there any price at which you are buying Bharti Airtel and Idea?

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A: Bharti Airtel is 35 times rich and Idea has moved up 25 percent but Reliance at 10 PE multiple looks interesting.

Anuj: What about non banking financial companies (NBFCs) because we have seen super strong numbers and the stocks have moved to 10 percent of their previous highs?


A: Bajaj Finance reported excellent numbers and for the past ten years it is growing at 40 percent plus compound annual growth rate (CAGR) and even at 30 PE multiple the stock is looking good. So NBFCs would continue to do well and our prime pick is Mahindra & Mahindra Financial Services which reported responding numbers but the focus of this government is going to be on agriculture and rural economy should do extremely well. Therefore, my bet in the NBFC space is Mahindra & Mahindra Financial Services.


Latha: What is your pick from the tech pack and any thoughts on Tech Mahindra?


A: Tech Mahindra reported good numbers. It should end with 35-36 kind of earnings, so its trading at about 13 times, which is very reasonable compared to Tata Consultancy Services (TCS) which is at about 18 times and Infosys at about 15 times. So there could be mild rerating of Tech Mahindra probably about 10-15 percent upside.

Sonia: A word on fast moving consumer goods (FMCG) because this time it hasn't been too bad whether you look at Emami, Godrej Consumer Products, anything from that lot that you like?


A: Godrej Consumer came with good set of numbers despite demonetisation, so Godrej Consumer would continue to do well. However, in the FMCG space one of the stock which has been absolutely ignored by the market which now has N Chandrasekaran as the chairman is Tata Global Beverage. It is at one time the sales, the revenue about Rs 8,000 crore, marketcap is about Rs 8,000 crore, nowhere in the world you will get FMCG company with a significant part of revenue coming in from branded sales trading at one time.


Pepsi, Coke or Starbucks, they trade at three-five times the sales and this is one company at one time the sales, debt free company, huge upside potential in Starbuck venture looks very interesting and in the last two quarters the company has been reporting extremely strong numbers. So price of about Rs 175 cannot be ruled out immediately in Tata Global.


Latha: Are you not looking at the microfinance institutions (MFIs) space and the housing finance space?


A: One cannot put a significant part of money in one particular sector. The reason I am bullish on Mahindra & Mahindra Financial because over the last six years the branch network has doubled, the number of employees has gone up by 60 percent and the company has gone nowhere. The focus of this government is on rural India. So as rural India prospers probably we will see this company growing at a much faster rate than what other companies have been growing at. So Mahindra & Mahindra Financial Services could be a big story.


Latha: The reason I asked you because it is expected that Budget will go big on affordable housing. Therefore, housing finance or more importantly cement.


A: I have an interesting play in affordable housing and the market has absolutely ignored this. There is a company called Mahindra Lifespace Developers. Most of the people in the market feel that it is into integrated cities and industrial parks but the company did two affordable housing projects, one is in Boisar near Mumbai and second is at Chennai. Mr. Arun Nanda, in the Chairman statement has clearly mentioned that affordable housing is going to drive future growth of this company. So this company at Rs 1,500 crore of marketcap, trading at about Rs 360 looks very interesting. The marketcap can multiply over the next five-six years. However, the other interesting thing is that the company reported excellent numbers and the stock came down. It is trading at 12-13 times the earning and it's Mahindra Group, so it looks interesting.

Latha: Is your favourite auto stock Mahindra and Mahindra because you like most of the Mahindra group stocks?


A: I have plenty of stories in the M&M group and its going to do extremely well. Yes, I do like M&M but Escorts has been my pick since the price of Rs 80. It has been my prime pick in the auto space.


Sonia: Any drug stock that you like?


A: We like multinational corporation (MNC) pharmaceuticals companies more than Indian pharma companies. We do like Novartis India. I have personal position in it and also another disclosure that we have positions in the stocks I mentioned like Mahindra Life, M&M Financials and Reliance. 


Sonia: How would you read into what has happened up until now in two-wheelers space, any thoughts there?

A: They would continue to do reasonably well. Eicher Motors continues to post in good numbers though it's a richly priced stock; it continues to surprise everyone on the upside. Hero Motocorp and Bajaj Auto should report reasonably fine figures going forward. So overall I am a bit positive on the sector.

(Disclosure: Network 18, which publishes moneycontrol.com, is a part of the Reliance Group.)



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First Published on Jan 31, 2017 10:52 am
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