Why are markets suddenly going gung ho and investors and traders turning cartwheels as these hospital stocks are getting rerated?
Some of the companies that reported numbers in the June quarter particularly Apollo Hospital, have seen more than 50% growth and the overall numbers across their verticals were way better than market expectations. We should not look at hospitals as a space only from a Covid perspective but because there was Covid and so much attention was there, people were looking at that as a main business category. But most of the other categories will see a decent amount of growth, particularly healthcare companies or hospitals which have added capacity in the last 6 to 12 months. The capex is over and so we will see incremental benefits come through, particularly for Apollo. As a result of the other business verticals, there has been some traction there also and there have been significant upgrades.
As a theme, people would take a view that this is something that would continue to deliver high growth with high margins and which is why we are seeing a lot of action in names like Apollo Hospital.
Is there merit in buying this energy theme because that is the megatrend — be it hydrogen or clean energy or solar energy? Is there a clear idea or a winner which should have some allocation to their portfolios assuming that it is a bet on clean energy, energy efficiency and an alternative to fossil fuel?
Absolutely. I think the kind of market that we are in is far more dynamic than what we were seeing five, 10 years back where people would wait for certain performance at the ground level before allocating a certain capital into those themes. The market is sensing certain changes and wants to participate in that growth much ahead of the actual data points. I definitely think that alternative fuels, clean energy would remain a very big theme. Gas is something that we could definitely look at, particularly .
Apart from that, I think, companies like
, which have some components of their business relating to that theme could also be an interesting play to look at. Though we are far away from the actual performance, as a theme it is going to definitely catch the investors’ attention at this point of time.
How are you viewing this partial relief in issuance of credit cards by HDFC Bank? It is going to impact profitability and margins fee income. Ever since the ban was imposed, we have seen underperformance in the stock as well.
It is a big positive trigger for HDFC Bank. The curbs have been partially lifted and would eventually pave the way for the complete lifting of the curbs because we are approaching the festive season and this business is very critical for the bank’s profitability, fee income, margins and the we all know that there has been a significant market share loss for HDFC Bank because of they are not being able to issue fresh credit cards and SBI cards and other competitors had actually gained market share.
We can expect some rerating for HDFC Bank on the back of that and we think that bank was focusing more on corporate loans and corporate business and now with this partial withdrawal of the ban, the focus may come back to retail business and eventually the market would start factoring that in. So it is a big trigger for HDFC Bank and we expect some positive reaction by the market on the back of that.
got the lion’s share of mind share and wallet share among the new listings. What else do you find exciting?
This has been a space where people were looking more for short term gains. Of course, some of the earlier ones like Route Mobile, Happiest Minds and some of the specialty chemical companies, Clean Science definitely appear to have pretty good business models and growth visibility. But since we have already seen a lot of excitement and considering the price at which now the issues are coming, we should be a little more selective about what one can really look at getting into.
I find Clean Science quite promising in terms of the business model, given the fact that globally the clean energy theme is catching up in a big way. So, whichever companies are falling into that theme and which is a part of the midcap name, would see a lot of investor interest across those names. We could look at those names selectively, but by and large, it is not a very comforting space given that so many issues have already hit and the excitement factor incrementally will not be that much. We would remain a little more focussed on the existing largecap companies rather than chasing those IPOs.
The entire ethanol play is now a well discovered story but for those who want to ride on that bus, what is a better way to play the ethanol story, is it via the sugar names or does Praj benefits the most?
When the ethanol theme catches up, the biggest beneficiary could be Praj Industries, because of the kind of business model that they have and the overall growth visibility because of the government measures could be much higher. So, that would be the biggest beneficiary.
Apart from that, names like
or other sugar names which have a higher component of that ethanol revenue would also stand to benefit. Sugar companies have a sugar cycle which helps them and on top of that, there are incremental benefits in terms of ethanol play which will bring far more stability to their business model which used to be more of a commodity driven play.
So that could definitely be an interesting one. The only catch is that all these names have run up quite a lot and we are seeing a scenario where there is a correction or some sort of a cool off in the midcap space. The right entry point for either Praj or Balrampur has to be figured out but as a theme, they will be big beneficiaries.
