- Galaxy Surfactants' volume growth
- ICICI Direct's outlook for 2024
Hiral Dadia and Hersh Sayta bring focus to the small and midcap stocks on 'The SMID Show'. #NDTVProfitLive
- ICICI Direct's outlook for 2024
Hiral Dadia and Hersh Sayta bring focus to the small and midcap stocks on 'The SMID Show'. #NDTVProfitLive
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TVTranscript
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02:39 - Hello and welcome, good morning.
02:49 You're tuned into the Small and Mid-Cap show.
02:52 I am Harsh Saita, with me is Hirald Dadya,
02:54 and we're gonna of course shift focus
02:57 to the small and mid-cap space
02:59 as we always do at 11 a.m. every day.
03:02 But let's take a quick check on markets.
03:05 You know, Nifty showing some bit of weakness,
03:08 down over half a percent in trade today.
03:11 You're seeing the advanced decline ratio,
03:14 and if we can have that quite solidly
03:17 in favor of the declines,
03:19 38 declines to the 12 advances that the Nifty 50 is seeing,
03:24 and even the advanced decline ratio on the NSE
03:28 is nearly two is to one,
03:30 more than two is to one, if I may say so.
03:33 Also, with regard to sectoral indices,
03:35 you're seeing across sectors,
03:37 you're seeing weakness except the defensive pharma.
03:41 The Nifty pharma index is up roughly 2%,
03:43 but other than that, you're seeing across the board,
03:46 you're seeing a sea of red.
03:48 Let's quickly shift focus to the Nifty Bank,
03:50 down around 7/10 of a percent,
03:51 or thereabouts, we're seeing the Nifty Auto
03:54 in focus on the back of those auto sales numbers,
03:57 which continue to trickle through,
03:58 one and a half percent lower on the Nifty Auto.
04:02 It's a benign set of numbers overall,
04:04 even from an auto sales standpoint, so no surprise there.
04:07 You're also seeing the Nifty Media, which is down 0.7%,
04:10 Metal also down by as much,
04:13 the Nifty PSU Bank also down by as much,
04:16 the Nifty Realty, which has had a solid run in 2023,
04:19 has opened 2024, also percent or so lower today.
04:24 So that's where we are at.
04:25 Let's quickly shift focus to the small and mid-caps.
04:28 Hiral, what's happening in that space?
04:30 Because the broader markets did see
04:32 some bit of positivity yesterday.
04:34 Where is it at today?
04:36 - Absolutely, Harsh, if you let's pull up the mid-cap
04:39 and the small-cap index on the screens,
04:41 and that'll tell you if that outperformance has continued.
04:44 There you go, cuts of around 8/10 of a percent coming in.
04:47 With regards to mid-caps and similar kind of cuts coming in
04:50 in terms of the small-cap index as well.
04:52 Overall, a lot of stocks which are in action
04:55 in today's session, you have Torrent Pharma,
04:58 where USFDA has now come out and given out the observations
05:02 with regards to their Chhatral facility.
05:04 The stock is now seeing marginal gains of 4/10 of a percent.
05:07 Interesting to see how Lupin has jumped in trade today
05:10 after Nomura has gone ahead and increased
05:12 their target price on the counter.
05:14 In fact, it's the PharmaPak that is up and about
05:16 in today's day of trade, and it's actually hit a life high.
05:20 Zee has around 11.6 lakh shares
05:22 that have exchanged hands in trade today.
05:24 So Zee Entertainment is one stock that is in focus.
05:27 RPP Infra is in focus today on the back of multiple orders
05:30 that they've received.
05:31 And so watch out for RPP Infra in trade.
05:34 Let's look at a few of the volume buzzers today.
05:37 Alembic Pharma, All Cargo Logistics, Spark,
05:40 Lemon Tree Hotels, in fact, Lemon Tree Hotels,
05:42 one of the top picks of Moti Dal Oswag,
05:45 for 2024 is in focus, Smart Move is coming in on that one.
05:48 And a PTC Industries, where the volumes are almost
05:51 little over three times its 30-day average.
05:53 So these are a few of the top gainers and movers
05:56 and shakers in trade today, and from a sectoral perspective.
05:59 Auto IT Bank, FMCG continues the downtake.
06:02 Pharma Energy are the ones which are seeing some smart moves
06:05 in today's day of trade.
06:07 And if you see from the auto names
06:09 that even Harsh was mentioning,
06:11 Bharat Forge, mild gains coming in there,
06:13 but from a MRF to a Balkrishna Industries
06:16 to a Motherson, Bosch, Sona, BLW, Tube Investments,
06:21 all of them have been trading under pressure.
06:24 So along with the auto majors, that's the OEMs,
06:26 you have the ancillaries also,
06:28 which are down and about in trade.
06:30 But let's shift focus to the chemical space.
06:33 Now, Galaxy Surfactants, that has been a stock
06:36 that we have been eyeing since quite some time.
06:38 That space has been absolutely interesting as well.
06:42 And overall, the company has actually guided
06:44 for a volume growth of around 6% to 8%.
06:48 Clearly, a lot of things which are now shifting
06:51 and changing for the company.
06:52 The key is what happens from here on,
06:56 because base all your chemicals that has been in focus,
06:59 we are seeing some bit of market share gains
07:01 that are coming in as well with regards to this company
07:04 in the HPC segment.
07:06 So let's understand from the management,
07:08 we have Mr. K. Natarajan, ED and CFO,
07:10 who joins us to give us more.
07:12 Mr. Natarajan, good morning and welcome to the show.
07:15 - Oh, very good morning.
07:16 Thank you for having me on the show.
07:17 - Always a pleasure.
07:18 Let's start with a slightly broader picture.
07:20 Clearly, when you talk about base all your chemical
07:23 businesses, which are based out of Malaysia and Indonesia,
07:26 they were taken as a major threat.
07:29 However, I do understand Galaxy Certificates,
07:32 the majority of the business comes in from HPC,
07:35 and you have seen market share gains in India.
07:38 How is it in terms of the other global markets?
07:42 - Oh, yeah.
07:44 So as you've seen from our results for the first half,
07:47 I think we had a very impressive volume growth
07:48 of close to nine and a half percent.
07:51 Africa, Middle East, Turkey,
07:53 which was a little bit lagging the previous year,
07:56 started turning around pretty smartly.
07:58 And we do see that continuing.
08:00 India has been a bright spot in terms of the way,
08:03 as an economy we've been growing,
08:05 and even for the HPC segment,
08:07 it's been a pretty bright spot.
08:08 We grew almost upwards in double digits,
08:11 high double digits in the quarter and for the year H1.
08:16 US markets have started coming back
08:17 after the round of restocking has gotten over.
08:22 Europe seems to be pretty much holding steady,
08:26 and Asia Pacific seems to be doing pretty well.
08:29 Latin America, again, as a market,
08:30 is coming around pretty smartly.
08:33 - Right.
08:34 So Mr. Uttarajan, from what you're seeing
08:36 with the revival that we're seeing
08:37 in terms of the global markets,
08:39 if you have to look at Europe and America,
08:42 does that mean that you will overshoot your guidance
08:45 of 6% to 8% from a volume perspective,
08:47 taking India and the global markets into consideration?
08:50 And if so, by how much do you think
08:53 will your market share improve?
08:54 - No, we would love to, as we did do better
08:58 than the 6% to 8% guided volume growth rate
09:00 in the first half.
09:01 But yes, I think things are looking better,
09:05 except that in case the Red Sea issue continues
09:12 in terms of the attack on all the ships,
09:15 even yesterday we had one,
09:17 and then it can lead to an issue
09:20 in terms of moving our goods into Europe,
09:24 America, and Latin America.
09:26 So, but as of now, we are still dodging the impact.
09:30 Things seem to be getting better.
09:32 But yes, that can be one headwind
09:37 that can create issues for us in the coming months.
09:41 - Right, still gauging the impact.
09:43 But let me quickly have your take on margins as well.
09:48 You did mention that Latin America
09:51 seems to show some signs of recovery.
09:54 You're also looking at possible rate cuts
09:57 starting in this calendar year, and we've entered that.
10:01 So what's your sense with regard
10:02 to where margins will lie, sir?
10:04 Do you expect some amount of margin increase
10:08 or starting to creep up towards that higher band of 15%?
10:13 - No, we actually guide the market
10:15 for an EBITDA per metric ton guidance.
10:18 So we did say in the last, you know,
10:20 Stockholm that we're looking at for the full year
10:23 it being around 19,500 to 20,000 per metric ton
10:27 for the full year.
10:28 And we do see that's a pretty good,
10:31 given the fact that, you know,
10:33 volume growth has been pretty impressive
10:34 in almost double digits.
10:37 And it also means that with Europe and America's coming back
10:42 with the specialty portfolio component being better
10:46 in those geographies,
10:48 the margins certainly have a room,
10:50 headroom to go up.
10:52 - Right, so Mr. Natarajan, from a margin perspective,
10:56 I'll take that conversation forward.
10:57 If you have to look at the raw material price trends
11:00 from crude palm oil futures to China,
11:03 ethylene to even phenol and benzene,
11:06 what is the trend indicating
11:08 and how much of it you see reflecting
11:10 on the margin side of it, negative or positive,
11:13 because it's a pretty mixed trend,
11:14 though on an average, everything has gone down.
11:17 - Well, yeah, so in fact, crude palm oil,
11:21 benzene, you know, they've been holding pretty steady.
11:24 They've been moving in a really tight band,
11:27 you know, almost three to 4% month to month.
11:32 Yes, so raw material prices being not so volatile
11:35 is good in terms of ensuring that our customers
11:39 would be able to ensure a very steady pricing
11:41 and even pass on some of the reductions to the consumers,
11:45 which can revive demand in a much more significant manner.
11:49 And you do expect that if this continues,
11:52 it's good in terms of getting the demand,
11:55 you know, story much better in India,
11:59 as well as in Africa, Middle East, Turkey,
12:01 which have been ravaged.
12:02 Africa, Middle East, Turkey has been pretty ravaged
12:04 by food inflation.
12:06 With that getting stabilized,
12:08 things can be much better in terms of volume growth.
12:11 - Right, and so to try and understand from you
12:14 what's happening on the domestic side of things,
12:17 you know, how is demand shaping up domestically?
12:21 We were expecting some bit of revival sometime this year.
12:24 When do you believe that that is gonna start
12:27 kicking through?
12:28 - Well, it should because rural demand has been lagging
12:32 and then we do see some green shots
12:36 in terms of it getting revived.
12:37 The stable feedstock prices as we just alluded to
12:42 is going to be the key to ensure that
12:45 whatever green shots we're seeing,
12:47 they end up getting sustained.
12:49 And yes, HPC segment is typically,
12:53 you know, grows in line with the GDP growth.
12:57 And we do see that, you know, the GDP growth projected
13:00 about 6.5% for India this year.
13:03 Things can suddenly look better from here on.
13:05 - Right.
13:08 Overall, Mr. Natarajan, if you have to look at
13:10 both the segments from performance effectiveness
13:13 to speciality care,
13:15 volume and revenue mix has been absolutely in line.
13:19 How do you see realizations then pan out?
13:22 - Yeah, realization is essentially very important
13:26 that with the steady feedstock prices,
13:28 it does enable you to manage your religions much better,
13:32 manage volatility much better.
13:34 And with the speciality portfolio getting a better traction
13:38 with the Americas and Europe coming back,
13:41 I think it holds a good stead in terms of
13:44 our margin trajectory being much better.
13:47 - So then if you're saying,
13:49 so are you saying that performance effectiveness
13:52 is much more margin accretive versus speciality care?
13:55 And if so, what's the outlook looking like
13:57 in terms of FY24 and 25?
14:00 Because majority of the companies are expecting
14:02 that demand revival to actually be stable
14:05 from FY25 onwards.
14:07 - I think it's not that the performance effect
14:10 is also as something in terms of
14:13 how do you manage your fixed stock positions well.
14:16 And that's what enables you to able to compete in the market
14:19 and able to get your volume growth as well.
14:22 Whereas speciality portfolio by nature
14:24 enables you to get better relations
14:26 given the nature of the applications
14:27 in which they get into the master's
14:31 and the prestige segments.
14:33 In Europe and US typically have been the big markets
14:35 for us as far as that segment is concerned.
14:38 And that's what I said,
14:39 with that picking up in US and Europe,
14:41 it suddenly is going to be better for us
14:43 in the coming months if the demand does sustain
14:46 in those levels, in those job opportunities.
14:49 - Right, so Ansh, we're almost into,
14:52 or rather we've just about started Q4.
14:56 Double digit volume growth very quickly, yes or no.
14:59 Will that be clocked in FY24 in your view now?
15:02 - Since we are getting to the 6% to 8% range,
15:09 we did grow at about 8.5% to 9% in H1.
15:14 So we do expect that we should be able to continue
15:17 this performance in the coming months as well.
15:21 - All right. - All right.
15:25 - Right, thank you Mr. Natarajan so much for joining us
15:28 on the show and sharing the view.
15:29 So volume growth and demand revival is something
15:32 which is gonna be key from here on as well.
15:35 But let's quickly slip into a short break.
15:36 Pankaj Pandey of ICICI Direct will join in
15:39 to talk about his 2024 bets.
15:41 Please stay tuned.
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18:19 - Right, welcome back.
18:25 You're watching the Small and Mid-Cap show on NDTV Profit.
18:27 And as we enter 2024, where are the markets really headed?
18:31 Where are the most opportunities
18:34 or where are the most lucrative opportunities lying?
18:37 We have Pankaj Pandey who's the head of research
18:39 at ICICI Direct who joins us now to discuss,
18:42 of course, 2024 targets for the benchmark indices
18:46 as well as his top bets and themes for 2024.
18:50 Welcome, sir, on the Small and Mid-Cap show.
18:53 Quick question, first off,
18:56 you've set a target of 25,000 on the Nifty for 2024.
19:01 What is, in your view, gonna drive this,
19:06 what in your view is gonna drive these markets forward?
19:09 Because we've seen a wonderful run in December of 2023.
19:13 And especially even in the Small and Mid-Cap space,
19:16 we've seen a really solid set of returns in 2023.
19:21 So where do you see the Small and Mid-Cap space also go?
19:25 Can we have your views?
19:26 - So hi, good morning.
19:28 Thanks for having me.
19:30 Wish you and all the viewers a very happy new year.
19:33 Now, our sense is that when we sort of approach 2024,
19:39 overall, if you look at current Nifty levels,
19:43 market is trading at about 20 times
19:45 F525 earnings of 2018.
19:49 And this is not achieved by any comparison.
19:51 Our sense is that since the earning momentum is still good,
19:55 so we are expecting about a 16% CAGR
19:57 kind of a growth in earnings.
19:59 So our Nifty EPS for 2026 is 1,250.
20:03 And we're just looking at overall factors.
20:09 And our sense is that while valuations are rich,
20:13 but we don't see a reason for these valuations
20:17 to sort of get better,
20:19 which is why we feel that we still have,
20:21 so we are still sort of valuing Nifty at 20 times
20:25 on a forward basis,
20:26 because somewhere down the line,
20:27 we will look at incorporate F526 numbers as well.
20:31 And as a result of that,
20:32 we feel that the market will offer about 15%
20:35 kind of an upside,
20:36 and which is why we have arrived at a target price
20:40 of 25,000 on Nifty.
20:42 Now, so our sense is that when you look at the overall setup,
20:46 you have domestic inflows have already been very robust.
20:49 I mean, you're seeing inflows of nearly $2 billion
20:52 on a monthly basis.
20:54 Then you have EPFOs incremental,
20:57 which comes to somewhere about 3 to 4,000 crores
21:00 on a monthly basis.
21:01 And then on top of it,
21:03 with the overall setup that the Fed is going to cut rates
21:06 by 75 bps, probably market is expecting more.
21:10 So overall our sense is that the F5 inflows
21:12 also will be good.
21:13 And on top of it,
21:15 we are expecting a good amount of inflows
21:17 on the debt side also.
21:19 So I think with good liquidity inflows
21:21 and earnings being quite good at 16%
21:26 our sense is that valuations are not going to contract,
21:28 and which is why I feel that despite the good run up
21:31 what we have seen in the market of 20% market
21:34 will still deliver in line with the earning growth,
21:37 which is why we feel that 25,000 kind of a target
21:40 for NFTs looks believable to us.
21:43 Now, when we look at some of the teams for 2024,
21:48 in fact, not even 2024, even beyond,
21:51 I think some of the prominent teams have been the one,
21:54 I think CapEx cycle has been still sort of going on.
21:56 And largely up till now,
21:58 the CapEx has been driven by the government
22:01 and our sense is that it will become more broad based.
22:05 I mean, even if you sort of look at the recent commentary
22:07 from tier one players.
22:09 And once that happens,
22:10 you have core sectors like cement and steel also,
22:13 which should sort of do well.
22:15 And auto is already sort of riding the premiumization trend
22:18 and that is getting stronger with the fact that
22:21 when you look at the demand for top end models
22:24 or feature rich models is getting stronger.
22:28 And bank obviously,
22:30 we feel that nothing will happen without banks
22:32 and banks obviously will have to participate
22:35 and banks have come back on a very strong footing
22:38 in terms of most of the parameters you look at.
22:41 And real estate is already sort of seeing a decade
22:44 or we are probably in the second or third year
22:46 and our sense is that real estate cycle
22:48 usually last five, six years, if not more.
22:51 So I think these are the teams which we feel
22:54 should play out in 2024 and even beyond some of them.
22:59 And most of our recommendations are within these teams only.
23:03 - Right, thanks Pankaj for that.
23:05 Let's quickly look at your topics from the BFSI space.
23:08 You're positive on Ugro Capital as well as SBI cards.
23:12 What's your rationale?
23:13 - So on SBI card, our target price is 950.
23:18 A reason for liking SBI card is that,
23:20 see credit card is a good business.
23:22 It's a high return ratio business,
23:24 5% kind of ROEs are in excess of 20%.
23:29 Now this company hasn't done well in the last one year
23:32 and lastly because I think there are a number of factors.
23:36 While this company has got about 18 to 19% kind of a share
23:40 in terms of overall card issued or in terms of spend.
23:43 But the challenge always has been that
23:47 we have seen a lot of regulatory clampdowns also.
23:52 But our sense is that everything is there in the prices
23:54 at this point in time.
23:55 Our sense is that the spends will continue to grow.
23:58 And the segment, say for example,
24:00 revolver segment was sort of experiencing moderation
24:04 and our sense is that our company is looking to sort of
24:07 mitigate that to some extent by coming up with new segments
24:11 or new categories like when people sort of spend on card,
24:16 you convert those into EMIs.
24:18 So that's what sort of help.
24:20 And then I think our sense is that
24:21 on the procurement side also,
24:23 the company is going to procure accounts
24:26 a lot more digitally.
24:28 And on top of it, our sense is that
24:31 the interest rates when they decline,
24:33 usually the cost of fund for this company will come down
24:36 and that should lead to improvement in margins as well.
24:39 So worst thing or most of the worst things
24:42 are already there in the prices.
24:43 So we would expect recovery to happen in this business.
24:46 And which is why I feel like PSY card looks good to us
24:50 at current levels with a target price of 950.
24:54 Now on the U-Group, here our target price is 350.
24:58 Now MSME is a big segment, largely untapped.
25:00 I think this company is sort of a niche player there.
25:03 They approach this segment with a data-based
25:07 selective models, which is why they focus on
25:11 only fewer segments of the market.
25:14 And overall, the growth trajectory is expected
25:17 to be quite robust.
25:18 So this company is expecting 50% kind of a cagger
25:22 in terms of overall earnings.
25:24 ROAs are also sort of expected to improve
25:26 from nearly 1% to 2.7%, 24 and further to 3.3%.
25:31 So I think this is another segment which is sort of untapped
25:35 and this company is looking to sort of drive this
25:39 through their selective niches.
25:41 So which is why we like this company also
25:44 with a target price of 350.
25:47 Another positive for this company is that
25:49 not everything is going to be on the book.
25:51 So 50% on and 50% off the book is what the model
25:55 the company is going to follow.
25:57 - And so, you know, we're really short on time.
26:00 So if you can make this really quick
26:03 with regard to your other picks for 2024,
26:06 which ones do you think really stand out
26:09 within all the ones that you feel up
26:11 within the larger market?
26:13 - So Birla Corporation, the overall expectation is that
26:18 the EBITDA pattern should sort of double
26:21 from FY23 levels, largely because of lower fuel costs.
26:24 So then we have a target price of 17.55.
26:27 Now, Uno Minda, I think the auto looks very attractive
26:31 to us because this company is into alloy wheels,
26:34 seating, you have airbags.
26:37 And historically they've grown a lot more better
26:40 compared to the industry peers
26:42 because of the premium engine trend.
26:44 And they've got a fairly large auto book
26:45 of nearly 3000 odd crores on the EV side.
26:50 So this is another company which should benefit.
26:52 And MDC because our sense is that
26:54 with 300 million ton kind of a capacity being chased,
26:58 our overall sense will be that this company
27:00 will continue to sort of ramp up the volume
27:02 by five to six million tons every year.
27:04 That should lead to double digit top line
27:06 and bottom line growth and is trading quite attractive
27:09 at four times EV by EBITDA,
27:11 with a target price of 250.
27:13 And Grindwell Norton, largely because this company
27:17 used to do a capex of nearly 50 odd crores
27:20 on a yearly basis, but in the last one and a half years,
27:23 they have done a capex of 424 crores.
27:28 And which is why our sense is that ideally from,
27:31 with this kind of a capex,
27:32 the company will be able to deliver
27:33 double digit kind of a growth
27:36 and with a target price of 2700.
27:40 And last but not the least,
27:41 the real estate sector is sort of doing very well.
27:44 Greenply, our sense is that should do well
27:48 because they are coming up with an MDF plan
27:50 which is already operational.
27:52 Capacity utilization should ramp up
27:54 from 45% expected this year to more than that
27:57 and with better margins.
27:59 So that should sort of lift the overall margins
28:01 of the company from single digit to double digit
28:04 and with a target price of 295.
28:06 Right, Pankaj.
28:08 Thank you so much for taking us through all of them
28:11 in such a short span as well,
28:12 because these are topics that investors are watching out for,
28:16 but clearly good cycles that could be in the offing.
28:19 So that's Pankaj Pandey, head research at ICICI Direct,
28:22 giving out his topics for 2024.
28:25 Completely out of time,
28:26 but that is a wrap on the small and mid-cap show
28:29 and the thank you from Harsh and myself.
28:32 Lots more lined up on the other side.
28:33 Please stay tuned to NDTV Profit for more news and updates.
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