In an interview to CNBC-TV18, Prakash Diwan, Market Expert at 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 & Anuj Singhal.
Latha: What do you do with LIC Housing Finance considering that Dewan Housing Finance Corporation (DHFL) has done better?
A: The scenario that is changing on the housing finance side is a lot of job creation which was expected to come through, has not happened and there is a strong correlation between new employment generation and housing finance upticks, especially IT and Bengaluru as a market is still grappling with a lot of surplus inventory, so is Pune; these were IT hubs in the making, Pune at least, and that has not taken off. So what is likely to happen is affordable housing focus will benefit a segment of HFCs which are very good at lending to that segment. Affordable housing sounds good when we talk but it is not easy to do traded analytics.
DHFL scores very well and in spite of all that you have seen robust improvement in sanctions, disbursements and that is in tandem. It is not just that disbursements have gone up but sanctions haven't kept pace, both of them are growing well and once they do a fund raise at a lower cost, it will become an added advantage and nullify the high cost borrowing which they did last time around. So DHFL continues to offer immense value there. I wouldn't look at LIC Housing.
Can Fin Homes' business is separate, let us wait for the numbers but the segment it caters to is a public sector undertaking (PSU) government employees' basket and that's promising at this point. So both DHFL and Can Fin Homes stand out vis-à-vis the others.Sonia: We are heading into a Budget and there is an expectation that there will be higher capex spending etc in sectors like infrastructure, roads, any stock that you have identified from that space?
A: One focus is on Budget and second, the government now finds itself in a sweet spot where it does not see exceeding the fiscal deficit targets and still a lot of expenditure is available to be carried out and before March we will see a lot of these orders flowing into infra and capital goods sector. However, my sense is companies like KEC International, Siemens, a lot of the power companies like Power Grid Corporation of India, Rural Electrification Corporation (REC), all starts seeing a lot of cheques being written to them to complete the projects that are on the cards.
A stock that we have started seeing benefit a lot because of a change in two things - one, environment in the Gulf is moving very positively because of oil money coming back and that is why Larsen and Toubro (L&T) move Rs 120, it has done that without raising too many eyebrows.
All companies focus on to some revenue stream from the Gulf will benefit and a company called Fedders Lloyd; it's a company that is collaborated with the American and this company has got into a lot of rail projects. They have received a large order from the railways, there is one more which is being bid for and should be announced soon. So once that happens, this company's profile will change from central heating air-conditioning unit player to a much broader capex provider and that change in profile warrants a bit of rerating. So if you look at the earnings per share (EPS) projections that most brokerages also have, it is fairly under discovered in terms of PE multiple that it gets accorded. It has not been like well talked about but this is one stock one could look at from capex segment.
Latha: Your thoughts on Reliance Industries?
A: As I said last time, if there is a dip buy it. The USD 19.5 billion capex which was outlined, USD 18.5 has been done.
The benefits in FY18 are going to be significant, so the earnings per share (EPS) target for FY18 to be in Rs 115-118 range which is very reasonable. We are not expecting spectacular growth in either gross refining margins (GRMs) or petrochemical. One definitely would want the stock to be in Rs 1,250-1,300 zone which more or less is the broader consensus. So it's a buy on dips. The institutional interest will drive the next move in the stock, if that continues. Therefore, my sense is that people, who have missed out on Rs 100 rally last month, probably get another chance to do it.Sonia: Your thoughts on how to approach Geometric post earnings?
A: This has been a joker in the pack, it has gone down dramatically, it has come up dramatically but I opted to stay out of the drama. However, these companies which are very niche players will need to be revaluated after January 20 in terms of how the broader environment shapes up, but yes, decent set of numbers so it reaffirms for those who have bought into lower levels.
Latha: You are positive on Ashok Leyland?
A: I am positive on Ashok Leyland because in spite of the whole slowdown that commercial vehicles were expected to, but April 1 is a change in the next stage of emission norms and there will be a lot of inventory build-up towards that. The auto sales numbers, the wholesale number has gone down, retail has gone up which means there is an inventory build-up that is yet to happen and that is what Ashok Leyland is likely to benefit out of.(Disclosure: Network 18, which publishes moneycontrol.com, is a part of the Reliance Group.)
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