What triggers do you see in EaseMyTrip?
You have to club EaseMyTrip with other internet stocks like Paytm, CarWale, Zomato, etc – the entire block of new economy stocks. Among them, EaseMyTrip is one of the few stocks which has established profitability. It is operating in the air ticketing business. It would be a $25 billion industry in the next 5 years. The market share of this company has increased from 3.1% last year to around 5% today. EaseMyTrip is not charging any convenience fee as compared to its peer MakeMyTrip, which charges convenience fee and is making a loss. Without the convenience fee, EaseMyTrip is a profitable venture.
We are going to see some substantial run-up in this stock as it gains market share. In terms of trying to quantify what kind of returns can come from this stock from the unlock trade, it is a question mark. The western world has seen pent-up demand for travel and hotels. I think that we are in a very sweet spot in this stock and we will see some very good gains from the current levels.
What about StoveKraft? Do you see it as a value play? Home improvement trend is picking up.
Yes, that is a new trend picking up. StoveKraft’s direct peers are Butterfly Gandhimathi Appliances, TTK Prestige, Hawkins, CG Consumer, Havells and Bajaj Electricals. This entire peer set is available at 30 plus valuations for FY23 but this stock is quoting at about 15 times (forward P/E). StoveKraft is a new listing. They have got a 125-year-old brand called Pigeon. They are at the lower end of the segment. In the premium segment, they have a famous US brand called Black & Decker. In the mid-price segment, they have another brand Gilma. So they have a presence across the entire spectrum.
Kitchen appliances are seeing massive purchases given the fact that lifestyles of people are changing. Lockdowns are forcing people to upgrade their lives. Ease of convenience has become the dharma now.
Talk about Deepak Fertilisers. What is the most important trigger you see in the stock?
In the very short-run, the fertiliser business is going to scale up from 50% utilisation to 100%. Cash flows are improving because the government is paying subsidies very quickly. So we will see ROCEs improve from single-digit to double-digits. We expect a rerating of the stock in the medium-term. The Technical Ammonium Nitrate (TAN) business is at full capacity. They are getting very strong cash flows from there. In FY25, we will see a Rs 3,000 crore capex for TAN. People will recognise that just like Deepak Nitrite, this is also a chemical play. We expect ROCEs to jump up from current levels. With a cheap valuation, this stock has very strong earnings visibility in the short-term. With growth coming in the medium-term, it may get rerated.
