Several brokerages have raised their price targets for . Do you think the stock can up by another Rs 200?
It is possible over the next couple of years. The short-term assessment of most brokerages come from the quarterly numbers and the management commentary. A 10 per cent credit growth is going to be very tough this year when the overall credit growth of the system is running at 5-6 per cent. To achieve 10 per cent growth, SBI will have to grow at 16-17 per cent till the end of the year. It will be very tough in the overall macro environment in which we are in.
The good part about SBI is that its subsidiaries, whether insurance or AMC, has been doing well. The value of the core bank in its stock price has been reducing, so there is a case for an upgrade. The extent of the upgrade will depend on how the credit quality plays out because SBI has been very aggressive in MSME and retail lending over the last 1-2 years.
Which private bank is the best placed now?
The overall credit growth is small and every bank is saying we will grow in double digits. So if everyone is going to grow in double digits, then who is going to degrow? Unlike last year, banks are over optimistic in what they will be able to achieve. In the near term, it seems that the impact on NPAs is going to be more because of lockdowns.
For ICICI Bank, the rerating process could continue but in the near term financials still have risk because of the NPA build-up.
Have steel stocks corrected enough for one to re-enter?
Globally, steel prices have corrected. In China, they have corrected by 12-15 per cent from the top. China, which is 60 per cent of commodities market, is becoming more serious about controlling inflation. To that extent, the upside in metal prices have become restricted in the near term and so the performance of metal stocks will also be muted. For the near term, the big up move could be over. If the global economy recovers and there is no big supply addition for the next 2 years, we should see another round of uptick. People can wait and see if these stocks correct more and then take a bet on them over the next couple of months.
What makes you bullish on United Spirits Ltd (USL)?
USL results were positive. Their operating profit growth exceeded expectations of analysts. But the price target of many brokerages are still not substantially higher from the current market price. This gives an opportunity for long- term investors to buy now because brokerages will start upgrading expectations from the next few quarters. There will be an impact of management restructuring and the margin uptick will continue.
USL is one of the cheapest FMCG players now. It is a stock with a very strong combination of brand as well as growth prospects. For the long term, it is a buy given the overall valuation of the stock.
