- 2 years ago
Profitmart Securities' Avinash Goraskshakar shares insight on #HeroMotoCorp, #Cipla, #GlandPharma, and other stocks to watch in trade today. #BQLive
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00:00 primer. Look at how the markets are panning out as we speak a pretty flattish move and
00:09 we are again below the 11,000. I'm sorry, I beg your pardon 19,600 mark and pretty much
00:14 hovering around those 45,000 levels in terms of Bank Nifty. The advance decline ratio is
00:20 favoring the bears in today's session. So it's gonna be interesting to see how the day
00:24 pans out. But a lot of stock specific action and a news heavy day it is and joining us
00:29 on the show to discuss more is Abhinash Koiraksakar, Director at Research Profit Market Securities
00:37 joining in. Abhinash, good morning and welcome to the show.
00:40 Yeah, good morning, Kiral.
00:42 Abhinash, my first question coming to you is let's look at a Maruti and trade. An interesting
00:48 move with regards to Maruti where they've decided to take over the Suzuki plant in a
00:54 share swap deal by giving them equity versus an all cash transaction. What do you make
01:01 out of this? Because clearly they've said that the profitability, the impact in terms
01:06 of EPS and the dividend payout is going to be much better over the next eight years taking
01:12 this. How are you looking at it and what would you advise investors to do?
01:16 Yeah, I think, Kiral, I think the strategy of, you know, buying out the Gujarat plant
01:23 for equity and not cash is definitely a positive development. We believe that, you know, longer
01:29 term, I think this will enable SMC, that is Suzuki Motor Company to increase its stake
01:33 here. And more importantly, I think this plant is a very valuable asset considering the fact
01:39 that demand has grown significantly. I think capacity now would be available in-house once
01:44 the Gujarat facility comes into the books of Maruti Suzuki. And more importantly, the
01:49 markets would obviously look at it positively that now the asset will be owned by the company.
01:54 I don't think that inclusion of this asset is going to have a very significant impact
01:59 on the return on capital employed at the ROE because I think all said and done volume growth
02:03 is pretty robust. I think we had a good monsoon. So I think markets are looking at much stronger
02:08 trajectory numbers and the company has a very strong order book plus a new product, you
02:13 know, kind of lined up. So I think all said and deal, this non-cash deal is definitely
02:18 encouraging. I think at what price it is completed, I think is going to be very important
02:23 because that would decide the percentage of equity dilution in the very near term. But
02:27 net-net longer term, it's a positive. Right. So net-net a positive coming in there, you
02:36 know, in terms of Maruti. But moving on, in terms of other automakers, you have Eminem,
02:40 which has been in focus yesterday. We saw some smart moves in terms of Eminem. A couple
02:45 of key developments there as well with regards to the clarification that the management gave
02:49 with the investment in RBL Bank. Secondly, Temasek coming and investing in the EV side
02:54 of the business. And thirdly, in terms of the EV business being spun off, that could
02:59 be a probability. Overall, how are you looking at Eminem, Avinash? I think Mahindra and Mahindra
03:08 Heral reported a very robust quarter one numbers, I think much better than what the street estimated.
03:13 And I think on all parameters, whether it was top line growth or whether it is operating
03:16 profit and the bottom line growth, I think numbers were much better than the street expectation.
03:20 And I think this momentum will continue. More importantly, you know, the UV business continues
03:25 to be very strongly positioned considering that the order book pipeline for certain models
03:31 is almost 18 to 24 months. More importantly, on the electric vehicle business, Mahindra
03:36 is extremely aggressive. And I think with Temasek now coming in and buying out a significant
03:41 stake is obviously going to add a lot of muscle because a lot of product development and new
03:45 launches are expected over the next 12 to 18 months in this segment. And as you said,
03:49 if this unit is, you know, demerged and separated into a separate entity, a lot of value and
03:55 blocking could come in. Hopefully, you know, if this, you know, company is then, you know,
03:59 made public. As of now, I think the focus of the management is to actually build a solid
04:04 market share in this segment. So I would believe that Mahindra and Mahindra would continue
04:08 to juggle on. Our house view is that we should, you know, one should definitely accumulate
04:12 the share on every decline. Our target price over the next 12 to 16 months.
04:18 Right. So that's with regards to where M&M goes. Moving on, Hero Motors is in focus as
04:23 well. With regards to the X440 bookings, they've crossed 25,500 units. September, October are
04:29 the target lines that we're talking about in terms of manufacturing as well as deliveries.
04:34 How are you viewing Hero Motors? I think Hero Motors should do extremely well.
04:40 Already today, the markets have given a big boost up and a sentimental booster to the
04:44 stock. 25,000 bookings for the Harley Davidson model is definitely good news. And I think
04:49 within that, the management has hinted that a majority of the bookings have come for the
04:53 premium kind of model. And I think margins here are going to be significantly better
04:57 than the existing product margins. Although 25,000 numbers is a small number, what the
05:02 market would like to see is how strong and sustainable these numbers carry on on a month
05:06 on month basis when actually delivery start. So I think it's going to be quite interesting.
05:10 We are going to see a lot of competition in the higher end luxury bikes and we'll have
05:14 to see how Ayesha Motor reacts to it. But definitely it looks like, you know, the Hero
05:19 Motor has got a good winning model in its place. And I think incremental volumes, the
05:23 effect of that would be felt in the second half of FY24 and fully in FY25.
05:29 Alright. Moving on, Zipla is an interesting one to watch out for as well. In fact, the
05:34 stock has hit record high levels in today's session. Avinash, how are you looking at Zipla?
05:40 Because clearly, I mean, a lot of news reports that are coming in on Zipla selling stake,
05:46 the promoter selling stake there and where Blackstone probably has submitted a bid for
05:50 stake in Zipla. News reports are not confirmed yet by the company. How are you looking at
05:54 Zipla? I think my sense is the near term reason for
06:00 the stock price to rise as lively because the family, you know, management family who
06:05 runs Zipla is planning to divest its stake. And I think BlackRock has already made an
06:10 offer. I think the market would like to wait for some clarity here. But definitely the
06:14 market is expecting that once Blackstone gets in, you could see multiple opportunities for
06:19 this company in the overseas markets also. In the domestic market also, the company seems
06:24 to be well positioned. And this Pharma rally, we have seen that quality Pharma stocks have
06:28 actually outperformed. So I think it's definitely a positive move. We'll have to wait for more
06:33 clarity. But definitely at these levels, you know, I think if an investor wants to buy,
06:37 I think you should obviously look at it from a slightly longer term horizon. Numbers are
06:41 solid, but I think this narrative which has come in as of now could obviously re-rate
06:44 the stock in the near term. Right. Staying with the Pharma names, how are you looking
06:50 at a Glant Pharma? Because overall, if you see from a result perspective, the profits
06:56 have fallen, but it's a beat in terms of the street. The Synexi acquisition is something
07:01 which has boosted the performance of the company this time around as well. What would you recommend
07:07 investors to do with a Glant Pharma? The stock is up 20%.
07:14 I think after a very long period, the stock has actually shown some improvement in its
07:19 operating metric numbers. And I think I would prefer to wait for at least another quarter
07:24 because there has been a lot of disappointment on this stock in the past few quarters. Some,
07:29 I think, visibility signs of earnings getting stabilized are definitely being seen. My sense
07:35 is that when the stock has gone up by 20%, it's definitely not a good move to latch on
07:40 to this price. I think it would be better if the stock consolidates, let the price correct,
07:45 and then I think we could add some few positions here. But again, I would like to reiterate
07:49 that players like Sun Pharma or typically a Lupin or maybe a Torrent Pharma, I think
07:54 these are more stable players. So I think it's better to wait for at least a couple
07:57 of quarters before we get a clear sense on the visibility and some sort of management
08:01 commentary because the performance in the past has been quite lackluster and completely
08:07 flipsy-fawzy. So I think it's better to wait. I would not buy at the current price. But
08:12 yes, investors who have it should definitely hold on.
08:15 Right. So that's with regards to where Glant Pharma goes. Moving on, let's look at a few
08:22 of the other names from the chemical space. You have Bayer CropScience which reported
08:26 numbers. What would you advise investors to do with Bayer?
08:31 I think numbers have been surprisingly very good. In fact, in a season where most of the
08:35 agrochemical companies have done badly, they have shown decent numbers. I would believe
08:40 that the commentary and obviously the kind of visibility which the company management
08:44 has mentioned, I think should definitely keep the stock in line. So I think investors who
08:49 have the stock should hold on. But I would not suggest here also investors to hurry.
08:53 It's always better to wait for some time because valuations are not cheap. They are
08:56 fair to expensive. So I think only on declines one can accumulate here.
09:01 Right. Tata Chemicals is another one. A slightly weak set of numbers coming in there. How are
09:06 you looking at it? I think here one could expect a little more
09:12 pain in the near term because the management commentary has also been pretty cautious.
09:16 Sodash also corrected by about 8-9%. I think the trend is not going to change in the near
09:21 term. So I think it's better to keep away for the time being because you would see maybe
09:25 the September and December quarter also being a little weak. Once I think the trend changes
09:31 and we see visible signs of demand uptick gaining, that would be a better time to accumulate
09:36 the stock. I would not suggest fresh entry at these levels.
09:39 Right. Moving on, let's see Jupiter Wagons in trade. The stock is up some 4-5%. Railway
09:45 stocks have been buzzing as well. Raid, Cain, these are a few of the other names which are
09:49 seeing some smart moves. How would you look at the sector and your view on Jupiter Wagons?
09:54 Well, I think the wagon sector is definitely full of excitement because there's a huge
10:00 kind of demand pipeline for all these companies. The market leader, Tata Wagon has also shown
10:06 very strong numbers. Jupiter Wagon also showed very strong numbers. The benefit Jupiter Wagon
10:11 enjoys is that apart from wagons, they make body building parts for commercial vehicles,
10:17 which is also a significant contributor to the top line. I think numbers have been very
10:21 solid here. But I think if you look at the valuations, I think valuations seem a little
10:25 expensive now. So I think it's better to wait for the stock to consolidate. Overall, I think
10:30 the markets are looking forward that a fresh 25,000 number wagon order is going to be announced
10:35 by the railway in the near term. And that is what is keeping the stock elevated. Numbers
10:42 are good, but I think valuations definitely seem a little expensive. So I think it's better
10:45 to hold on. Fresh buying is advised only at lower levels.
10:49 Right. Moving on, another one that is in focus today is a BEML on the back of an order win.
10:56 How are you looking at the BEML in trade, Avinash?
10:59 I think most of the defense stocks, specifically companies which are sitting on large order
11:05 books, I think incremental orders, whenever they do come, they create a lot of short-term
11:09 sentimental booster effect for the stock. So I think we are positive on BEML. Our sense
11:13 is that over the next 12 to 18 months, there's a good top line as well as profitability kind
11:18 of visibility. And therefore, I think one can definitely look at holding on the stock.
11:22 I would suggest that except for this order, purely on this order, I don't think the stock
11:26 would get significantly elevated. We'll have to wait for at least the next one or two quarters
11:30 because numbers have been decent. But I think valuations are not extremely cheap. They are
11:34 fairly expensive. So I would prefer to hold on.
11:37 Right. Would prefer to hold on in terms of BEML. India's Sydments is another one that
11:43 I want to talk to you about as well. Now, the company has posted a loss, but clearly
11:48 a lot of commentary that has come in from the management as well with regards to India
11:53 Sydments. How are you looking at the stock and what would you advise investors to do
11:57 on this one? Because clearly the company has said that it immediately requires at least
12:02 400 odd crores to tide over the liquidity crunch. It's planning to monetize some of
12:08 its non-core assets as well to meet the minimum capital expenses. What do you make of this
12:14 company and what do you advise investors to do?
12:17 I think India Sydments is a very large player in the southern market and I think that is
12:22 definitely going to help them over the longer term. In the near term, they would definitely
12:27 have some liquidity issues considering the fact that the first quarter has not been very
12:31 good for them. But I think cement as a sector, we believe that the second half of FY24 could
12:36 see a lot of volume growth considering government would also be sanctioning several new projects
12:41 ahead of the general elections. So my sense is that investors who have a 12 to 18-month
12:46 time frame can definitely look at this company. Maybe in the near term, the stock may not
12:50 rise significantly, but over the longer term, they do have a very good geographical positioning.
12:56 And I think if they dispose of their non-core assets, that would give them a lot of multiple
13:00 value in terms of their cash flow. So I think continue to hold, but those guys who want
13:04 to take a 12 to 18-month view can definitely dip in at the current time.
13:09 So that's with regards to India Cement. So lots of stocks that we've discussed so far.
13:13 Thank you, Abhinash, so much for joining us on the show and sharing the views. But clearly,
13:17 the markets do look in a phase of consolidation. No major moves coming in. In today's session,
13:21 we are sub the 19,600 mark already, and the breath is pretty much in favor of the bears
13:27 as we speak. That's all that we have on this session. Thanks for watching. And lots more
13:31 lined up on the other side. Please stay tuned to BK Prime.
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