In an interview to CNBC-TV18's Sonia Shenoy, Latha Venkatesh and Anuj Singhal, Prakash Diwan of prakashdiwan.in spoke about the fundamentals of the market, specific stocks and sectors.Below is the transcript of Prakash Diwan’s interview to Sonia Shenoy, Latha Venkatesh and Anuj Singhal on CNBC-TV18. Latha: Telecom stocks is the first question. Has Bharti Airtel touched its low? Anuj was pointing out that the Reliance Jio launch day low for Bharti, would that be a fair reference point or can it dip further?
A: It would dip further because what is happening is the buying stimulus is still not visible in Bharti and one of the reasons why Bharti’s fall was arrested was this confusion that the voice calls on Reliance Jio network would also consume data, which they have subsequently clarified that it is not the case, which means that the voice calls will be much more competitively priced than what we thought when data was assumed to be used. So, Bharti probably still needs to test further lows because it is really going to be 75 percent of their revenue is at a questionable stage, if not at stake completely.
What could take away the whole thing is that Bharti would eventually only live on the Bharti Infratel support. That is the key business. You will have to relook Bharti at some stage and look at what kind of infrastructure play it has. It has a superior play, no doubt. But that is what it will boil down to.
Latha: Over the weekend rating agencies have downgraded telecom stocks. Now you will now have to pay more money, if your rating is downgraded, even raising fresh money will become expensive.
A: The spectrum auctions, fortunately for them there is not much of an outgo that was expected. But this whole thing about Bharti being a completely integrated telecom service provider is no more going to be the base case. I am looking at it eventually being a holding company into Bharti Infratel as the biggest asset that it has and that valuation is way off from where it is today.
Sonia: What about Petronet LNG? Very good numbers coming in and the stock is up 30 percent in the last three months. You expect more re-rating post these earnings?
A: My sense is that you would have to look at if the gas business is also getting completely re-evaluated because it now offers a tremendous amount of visibility, it is a pure utility driven thing, which was not the case earlier. But within the gas play, it is going to be the city gas distributers who are deeply entrenched with an assured market that would do much better in terms of price-earnings ratio (P/E) multiples, in terms of premiums that they would attract. Petronet LNG has had a very good run, but it is still subject to a lot of vagaries on the regulatory side and I am not very comfortable the way those things impact some of these players.
If you look at Mahanagar Gas, it continues to remain my favourite. Of course, it has had a run up which is stellar from Rs 420, it went to Rs 650-660, you cannot expect much, but over a long run it would be. So, buy on dips is a clear strategy for Mahanagar Gas and the same way, maybe for Indraprastha Gas (IGL), but the dip ha to be slightly deeper.
Anuj: The other stock of course that will be one of the stocks of the day, Jubilant Foodworks. How much lower for the stock?
A: I would not be surprised if it tests below Rs 1,000 also at some stage very soon. The reason is there are no triggers that are in the offing. And the competition is not from the next big pizza chain. The competition is from anybody and everybody who is making food. So, the Swiggy’s of the world have transformed the business model whereas they have been too slow to react to the new change in the situation. So, my sense is you just need to stay out and let the management decide what they want to do with the business model itself.
Latha: The auto stocks have all been doing well, but Tata Motors?
A: Tata Motors, the journey has been so spectacular post the Brexit and last week while I was in the UK, I tried doing a dip test in terms of how the Jaguar Land Rover (JLR) perception is and you would be surprised, for the first time ever, the Jaguar product line is outpacing the Land Rover. Now I never knew about this internal competition they always had whether Jaguar sells more or the Land Rover brand sells more.
But the F-Pace SUV which has been a big hit in the UK is prompting them to set up a new assembly line in other nations, somewhere in East Europe. They are talking to a couple of players and if that happens, it is going to be a big change. Then depending on the Chinese market, they say is now the bare minimum that could be possible ever. Historically it has never been so low. So, Tata Motors is definitely going through very good times now. The turnaround seems to have started kicking in. I would not be surprised if you see Rs 600 plus levels very soon on this. The next quarter is also likely to factor in all this improvement that we are seeing.
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