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Last Updated : Nov 24, 2016 11:02 AM IST | Source: CNBC-TV18

Here's what Mayuresh Joshi has to say about banks

In an interview to CNBC-TV18, Mayuresh Joshi of Angel Broking shared his readings and outlook on specific stocks and sectors.


In an interview to CNBC-TV18, Mayuresh Joshi of Angel Broking shared his readings and outlook on specific stocks and sectors.

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

Sonia: What are you doing with the banks? Are you increasing allocations or are you fearful that there could be a rise in asset quality, in nonperforming assets, in the quarters to come because of the kind of damage that demonetisation has caused?


A: It is a problem of plenty at least at this point of time for a whole host of banks within the financial system. Therefore, the kind of deposits that are coming through and the pace at which they are coming through and considering the credit offtake in high single digits, they are going to have some issues. So the reprising on the bulk deposit side was an obvious reaction and you have been seeing that across banks whether private or public.


Second, in terms of asset quality issues, from Q2 perspective, you will see asset quality stabilise for a whole host of public sector undertaking (PSU) banks with a few exceptions but largely how the demonetisation story plays out for a few sectors which will get affected because of the cash crunch situation that we are currently witnessing, there might be some amount of wobbles happening on that front, but I do not foresee huge amount of slippages coming through on that front. As liquidity situation improves, you might have some stability coming into.

Close

Yes, the unorganised sector is going to take some amount of hit but the RBI provisioning to that extent will help. However, the corporate should not misunderstand this to be a repayment or a prepayment holiday. So, largely that message has to go through in terms of both the regulator as well as the banks.


The performance has been quite reasonable in my opinion and there would be better entry points in the market. So the larger public sector banks and the larger private sector banks, in a staggered manner, is something that I will be looking at, but on declines and again at better entry point levels over the next few weeks.

Anuj: From portfolio point of view, how would you approach names in the IT and pharma space because at least selectively we have seen some buying here and dollar strength is also helping?


A: Dollar is one variable for these companies to perform but if you look at both these sectors individually, IT sector still has some structural headwinds at least for the next two quarters, everybody on the street is aware and cognisant of  the fact that there are lot of furloughs coming through in Q3, the client postponement has happened on some projects and the discretionary spending patterns will get decided in Q4, which are contingent to whole host of issues; what probably happens with Brexit, what the Fed does, what policies Trump comes up with. So largely though valuations are looking extremely attractive at this point of time for the IT sector, as I have reiterated over the past few days, my sense is that you will again get better entry points.


Pharma, selectively top gear pharma names is something that I like at the current juncture. However, what you have seen in terms of Food and Drug Administration (FDA) concerns, have largely played out on their balance sheets and next two quarters might still take a hit in terms of the remedial cost still coming through, research and development (R&D) expenses are still high on the profit and loss (P&L) accounts but for instance Sun Pharmaceutical Industries' results, the results were extremely encouraging; 34.3 percent was the EBITDA margin, probably 13-14 percent growth specifically on the exports front. Yes, there have been concerns for Halol facility but if that gets resolved over the next few quarters, FY18 numbers will appear far better. However, one might argue that the National List of Essential Medicines (NLEM) portfolio might take a hit. Sun Pharma has already indicated Rs 1,500 crore on the domestic front at least for FY17 but synergies with Ranbaxy merger close to USD 300 million over FY18-19 can play out on their balance sheet and that can provide an impetus to earnings growth in excess of 26-27 percent odd.


Similarly for Lupin, you have probably seen the worst coming in and playing out on their balance sheet. And the kind of acquisitions that they have done in the past, the Gavis acqusition should start playing out and largely the kind of pipeline that they have got, 144 odd launches is expected in the US market, 45 finished dosage formulations (FDFs), niche offtake in the generic space, dermatology, I think those markets are going to see huge amount of uptick in the generic space. However, from earnings perspective it is quite attractively priced.


Therefore, within the two spaces selectively pharma is something that I like. IT, I am again reiterating that better entry points over the next few weeks.



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First Published on Nov 24, 2016 09:35 am
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