Here are Mayuresh Joshi's views on stocks and sectors

In an interview to CNBC-TV18, Mayuresh Joshi of Angel Broking, spoke about his reading of the market and his outlook on various stocks and sectors.Below is the verbatim transcript of Mayuresh Joshi’s interview to Ekta Batra & Anuj Singhal on CNBC-TV18.Anuj: What are your thoughts on Canara Bank and the kind of rally that we have seen? Is it a sign of things to come for public sector undertaking (PSU) banks or would you say it is good time to book profit?A: If you look at the number more closely, the asset quality was much more stable this time around in terms of the absolute numbers of gross non-performing assets (GNPAs) and NPAs coming out. However, largely the kind of provisioning that they have done and the expectations of the provisioning still remaining high in Q2 would be some event to watch out for.Secondly, if you look at the kind of de-growth that they have seen in their advances and deposits and the kind of moderation that we have seen both in net interest income (NII) and the pre-provisioning profit figures, it is not a very encouraging trend with a kind of run up that we have probably seen in the stock.Largely our own take is that though the recovery might take place as the management has indicated in the second half, one should look at numbers and how credit growth will take place because that is going to be the key for balance sheet expansion and for the return ratios to improve. Largely, we are maintaining a neutral view on Canara Bank at this point of time.Ekta: Have you managed to look at a couple of these smaller companies that came out with numbers or these midcap companies so for example something like a KG Denim, which is up around 13 percent odd on the back of what was a good operating performance. Gujarat Heavy Chemicals Ltd (GHCL) which reported good numbers but nonetheless that stock is off because they expecting flat volumes for FY17? Any of these kind of picks that you might have looked at and which looks interesting?A: Largely, this is not in our coverage, so I think difficult to comment on these ones. However, yes, few companies did report a decent set of numbers operationally. So, it is a larger universe that you are probably talking about. So, Bharat Financial Inclusion reported a decent set of numbers. Biocon reported with a decent set of numbers.Yesterday, I think a couple of companies did report a good set of numbers Navin Flourine Industries for example, Transformers and Rectifiers, but largely again I think this performance has to get repeated in terms of both the operating dynamics improving quarter-on-quarter (Q-o-Q) and the order book improving dynamically for each of these companies in their sectors. If those leverage benefit starts coming through, the cash flow improvement can be significant.The prices have moved significantly so the valuation comfort in terms of fresh investments probably is not there. However, if you look at a few stocks within this space itself, they do offer reasonable growth opportunities over the next two years.So, one has to pick and chose at this point of time because even valuations probably are little bit on the higher side compared to their 5 year and 10 year long-term averages.Anuj: Your thoughts on Cairn India now, Cairn and Vedanta Resources as well post the revised terms of merger?A: With the revised deal coming through, yes the sweetened proposition for Cairn shareholders has been laid out on the table. The stock accordingly has responded.What happens with Vedanta would be very interesting to note and though we are still waiting for due regulatory procedures to take place in terms of key approvals, what the minority shareholders have to say, the other aspects that one needs to also understand -- if the merger does go through -- is the tax liability of around Rs 10,000 crore odd, which can have an telling effect if it goes adversely.Secondly, how the pricing is going to pan out generally for Vedanta going forward.So, what you have seen probably in terms of prices for Cairn in terms of the premium valuations with the sweetened deal is there on the table. However, what will happen to Vedanta -- if the merger does go through -- will depend on whole host of these factors including London Metal Exchange (LME) pricing both on aluminium, zinc, lead, copper and what probably happens to their operational improvement going ahead.So, the cash on balance sheets will definitely improve overall net debt to EBITDA position for Vedanta if it goes through. However, all these aspects need to be carefully seen specifically in the case of Vedanta.Ekta: A lot seems to be happening in the online space. We just heard of another deal where the Myntra as acquired Jabong. What is your sense in terms of any online company that we could play this entire online business with through a listed company any thoughts on that?A: Dynamically, a whole host of changes are taking place in this space itself. I don’t want to particularly comment on one particular company but if you look at their peak valuations a year or a couple of years back and look at the kind of valuations they are probably deriving at this point of time, you have probably seeing a huge amount of erosion happening in terms of their expected market valuations.Anuj: At Rs 9,000, is Bajaj Finance still a good buy?A: Phenomenal story but again coming to the same argument of valuations and valuations probably looking a little bit stretched at this point of time. No doubt about the story and the kind of numbers they have posted this time around, they are exceptional set of numbers.Again, the transition that Ekta was just mentioning from 150 to 120 that might have some amount of effect for this quarter and the next quarter to come to say the least. That can also be abated by a little bit if an increase in the provisioning expenses for the company.However, largely the company has given stable performance quarter-after-quarter. My entire take is that fresh investments with valuations perspective looks a little bit tight at this point of time. However, investors holding on to the stock should hold on to a franchise like Bajaj Finance.Anuj: In the midcap basket any fresh picks that you have at current levels?A: If you take a two year perspective from the current levels, Navkar Corporation is something that can be looked at by long-term investors. The inland container depot (ICD) that they are getting at Vapi, 27 percent of their volumes basically supportive of their Jawaharlal Nehru Port Trust (JNPT) business with the real transmission lines and the real connectivity that Navkar has got that gives it a superior advantage compared to its peers.Secondly, if you look at the cost structure, the earnings before interest, taxes, depreciation and amortization (EBITDA) margins expected to remain in their 41-42 percent kind of a range and largely if you look at the topline growth, we are still expecting a 30-33 percent growth to come through, a bottomline growth of 31-32 percent, which will basically mean that the earning per share (EPS) for FY18 should touch somewhere around Rs 11.5 odd.If the operating leverage benefits as I was mentioning through Vapi come through along with the expectations of higher commodity movement happening specifically in terms of fibres, marbles etc that can have further leveraged benefits in terms of volume growth, which has grown around 15 percent odd on a year-on-year (Y-o-Y) comparison for FY16 over FY15. So, largely at 17.5 times we believe it is very valued.So, Navkar looks like a very promising bet but again on declines and in a very staggered manner over the next few months.