On whether auto sector is a buy now
Today it is going to be a big day because 60% of the Nifty earnings will get reported and people will have to work extra hard in terms of tracking what really pans out. Talking about the auto, we have seen a good catchup despite the concerns around this chip and the global environment but our sense is that the quarterly numbers that Maruti will report today and some of the two-wheeler companies have reported may not look that exciting.
But in a backdrop where we have seen the stocks doing a decent amount of runup, we may see a little bit of cool off or some volatility. Notwithstanding the quarterly numbers part, if one were to take a medium to long term kind of a view, then we feel that for the passenger vehicles, the overall environment looks far better and if we have incremental news flow in terms of chip supply getting better and a little bit of stability in the commodity prices, definitely auto as a sector will do much better.
We like Tata Motors, Maruti and to some extent Mahindra & Mahindra. These are the three names that we really like in the auto space and in the auto ancillary we like . Overall we feel that from a one or two year perspective, auto presents a great opportunity.
On Bajaj Finance numbers
The numbers looked pretty much okay though there has been a little bit of downgrade in terms of estimates for next year given that the credit costs were a bit higher but there are two things that I would like to highlight here. One is that there is a visible traction on the digital platform and the omni-channel strategy that the company has adopted. So given the aspirational legacy that Bajaj Finance carries with it and given that the platform companies and certain names which are out there in terms of IPO, people would start benchmarking Bajaj Finance to some of those names who do not have any sort of numbers in terms of the profitability or cash flows so there is going to be some excitement around that theme.
The way Bajaj Finance is positioned, people would really like to own a piece of that. Secondly, in terms of valuations, it is quoting 10 times next year’s price to book and we have all seen how people are debating about the valuations but the company keeps delivering on growth and a lot of investors would really like to own a piece of that. We do not want to look at this from a valuation perspective. We should look at it from a growth and positioning perspective and the kind of brand image that Bajaj management carries. We continue to feel that for long-term investors, this is a good piece to own.
On assessing Dr Lal as well as IRB Infra?
Dr Lal Path Labs numbers were pretty okay. The acquisition of Suburban Diagnostic may present some excitement. We have not really looked at how profitable Suburban Diagnostics is but one thing is very clear that post Covid, this entire healthcare diagnostics space will remain on the horizon for a lot of investors and people would want to participate there.
There is going to be some allocation for some of the hospital names as well as this diagnostic centres given that some of these companies have become too big and by sheer balance sheet size and are able to expand their network without having to put in hard cash. Suburban is a different story but that brings another dimension to the way people are looking at this entire space. We think Dr Lal Path Lab and Thyrocare would continue to invite some attention from investors.
In the case of IRB Infra, given that people have now started looking at some of the asset plays and some of these names were not doing so well for the last five years, now companies have started reporting good numbers with focus on the infra space outlays.
There would be some liking for names like IRB Infra. We do not cover this. We like KNR Construction which is a similar story and it is very well placed in the current environment.
On the right approach for retail participants
There have been bouts of corrections in the last two or three months and particularly midcap and the broader market has seen that. We are seeing the bad getting better now. It all depends on how the earnings pan out and what sort of growth the management are talking about. We feel that we are in a broad-based revival cycle. So notwithstanding some small corrections, we would continue to focus on the themes and ideas that we like. Some of the midcap names that we like at this point of time are Orion Electric, a consumer play where the top line was pretty strong in the current environment.
Apart from that, some of the names like Tata Power which had its own sort of a frenzy movement in a sharp correction and are now moving back into the positive territory. The kind of focus that they have on alternate energy and the kind of money which is coming into that space would bode well for Tata Power. Of course, there is the all-time favourite liquor space with IPL setting some benchmark and the core business getting better. We like United Spirits.
