Bullish on these 2 Tata group stocks: Sudip Bandyopadhyay, Inditrade
You have been tracking Infys numbers very carefully. The revenue and the order guidance has been maintained, the revenue has been slightly below market expectations while PAT is in line. Is there a chance that the stock may open on a softer side or would the 1:1 bonus announcement take care of that and some excitement build up in on the stock?
The numbers were pretty much in line and as you mentioned, the margin, PAT and even revenue by and large were in line. What will be a little disappointing for the market is the fact that they have not changed the revenue guidance and they have maintained the constant currency revenue guidance for the year at 6-8%.
Of course, please remember that this will be compared against the numbers which TCS declared earlier in the week and there the numbers came much better. They have talked about a constant currency revenue growth of about 10% plus double digit definitely.
In the balance, Infosys probably will open a little soft and we have to be very clear that we are talking about a very clear valuation difference and that gets justified by the revenue guidance difference.
One company is talking about a double digit growth. The other company is sticking to 6-8% growth. Even if you take the mid range, it is about 7% and there is about 30% plus underperformance vis-à-vis TCS on the revenue growth on constant currency terms. That will be a disappointment for the market and it will open soft.
Pharma is really becoming that interesting pocket as sudden wave of things turn around for them, a softer USFDA with lots of clearances coming in by. Any fresh opportunities within pharma now?
We like Auro Pharma. That is one stock investors can look at getting into. The largecap pharma we are generally avoiding. Things are improving and rupee depreciation also helps some of them as far as their profitability is concerned. But having said that, the real turnaround or the game changer events will start happening in the next fiscal and not in the current fiscal. Probably there will be opportunities going forward to buy them at an even more reasonable valuation.
Given how large a chunk of F&B revenues are in the total revenue pie for multiplexes, if outside food is allowed or there is a cap on the MRP of what multiplexes can sell within their premises, is it going to be a big dampener or would multiplex owners be smart enough to mitigate those losses somewhere else?
This is going to be a huge issue for the multiplex companies — PVR, Inox and even other operators. About 60% plus profit of multiplexes is derived from the F&B on an average for these chains. It will be extremely difficult for these companies to remain profitable if that segment gets hit in the manner which is suggested.
I will be very careful as far as Inox and PVR is concerned. Also, remember that the first half of the year has not seen any great box office collection. Some of the big name movies have not done as well as thet had been expected to do. They are already under pressure on the box office side. On F&B side, if this kind of thing happens and permanently damages their revenue model, that would be really worrisome. I will carefully watch this space and not touch these stocks at this stage.
Any opportunities in midcaps and smallcaps that you feel are attractive after the recent bout of correction?
There are two stocks but I do not know whether you still want to classify them as midcaps; Titan is a great story, we all know about it. One large investor had been selling, reducing part of his holding. The management had given a seasonal commentary on soft first quarter earnings. The price has corrected significantly and looks very attractive. The rationale core business is very strong. They are continuously gaining market share based on the market developments whether it is Gitanjali or Neerav Choksi or even PC Jewellers. The consumers are reposing more and more trust in the brand. It is a great story and investors can definitely buy it.
The other stock is again from the Tata stable. It is Voltas. They are gaining market share. The AC inverter is catching on and with rural electrification gathering pace, the business case for Voltas as far as room air conditioners are considered is very robust. Again, this stock can be bought by investors at current level post corrections.