In an interview to CNBC-TV18, Mayuresh Joshi of Angel Broking shared his readings and outlook on specific stocks and sector & Gajendra Kothari of Etica Wealth Management answered few personal finance queries.
Below is the verbatim transcript of Mayuresh Joshi's interview with CNBC-TV18:
Bharat Forge
Clearly from a valuation perspective at least from an FY16 base Bharat Forge is trading close to 23 odd times which is reasonable considering it’s long term averages, but clearly if you look at the earnings trajectory that the company has come out with even in the last quarter the EBITDA margins were close to 30.2 percent which clearly indicated the benefits of raw materials and operating leverage playing onto the stock price. If I look forward and move by the management guidance they are very optimistic on the CV segment specifically for the US market. They expect good growth coming there and also they have added a marquee client. Similarly on the domestic side they are doing significant amount of capital expenditure (capex) probably to added their forging presses that we cater to the PV segment which in our opinion is expected to do well and grow around 9-11 percent for the coming fiscal. Bharat Forge has the right elements in its place. The defense orders, the aerospace orders, the non auto component orders and the execution thereof is also moving and getting good tractions. So, again if I leave aside valuations and near term perspective with the investor probably holds on to the stock for the next couple of years one can make decent returns. So hold on, the stock is very good.
Bank of India
Clearly if one goes by the expectations of midcap public sector (PSU) banks, the asset qualities were the one big issue. And clearly looking the way the asset quality has panned out for Bank of India and the management commentary thereof, one does not expect probably the asset quality to improve drastically at least over the next couple of quarters to say the least. But, having said that, probably the credit growth should be far superior to the industry standards, at least for this quarter the NIMs should probably get maintained around that two percent, 2.05 percent mark. And clearly from a valuation perspective at 0.5 times price to book on an FY17 perspective looks very attractive. The asset quality just might be an overhang for a lot of these stocks including Bank of India. The low capitalisation ratio, the common equity tier 1 (CET1) ratio is at seven percent, that probably should also be a big overhang for the stock but valuation simply too attractive and Bank of India can probably ride the wave once the credit cycle and the demand probably comes back. If one holds on to the stock for the next couple of years, we remain optimistic on Bank of India. Our own target over the next 12-15 months is Rs 288.
Idea Cellular
Idea Cellular numbers were far better than what the analysts expected at least on the EBITDA front and that was because of lower network charges more or less with fall in diesel prices that we had seen. The mobile tariff and the data tariff is something which probably held up and the traffic flow was quite significant, so 8 percent increase quarter on quarter on the mobile business, on the data tariff business the traffic was quite significant and data contribution increased to 16.9 percent. The concerns emanate from the fact with the kind of spectrum payout of Rs 30,000 crore odd that they have done. It will increase not only the amortisation cost but the finance cost for Idea Cellular going forward and that would probably get reflected in its net debt going up close to 13,800 crore odd and the net debt to EBITDA probably inching up from 1.3 to around 2.6-2.7 times. Having said that, all these factors would weigh on the return ratio at least from a year’s perspective but one could hold on to the stock.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
