Nischal Maheshwari, Head-Institutional Equities, Edelweiss Securities, talks to ET Now about how one should look at Yes Bank and the NBFCs after correction and his top bets in metal stocks.
Edited excerpts:
Is Yes Bank in a value zone after corrections or an avoid?
The uncertainty will continue till we find out who is going to lead it. But I agree that at 1.2 time, 1.3-1.4 times price to book to FY20, the stock is in a value zone. One may come back and say that if something new comes out of the system and there is a bit of kitchen sinking, that might put the stock down for some time. But definitely, it is in a value zone at around 1.3-14 times current price to book and 18% to 19% ROE. One should accumulate the stock at current levels.
On top bets in metal
Tata Steel continues to be our top pick given that they have got Bhushan Steel as well as Usha Martin in their fold now. It is going to increase their leverage but given that the outlook remains very strong, there can be a significant increase in profitability for both the acquisitions that they have made. Their Europe problem is getting sorted out. So, Tata Steel at 5.2 times EV to EBITDA FY20, seems to be in a very good spot.
On the non-ferrous side, we like Hindalco and also some of the smaller names like Tata Metaliks and Tata Sponge. A lot of these companies are doing pretty well and seem to be on a good wicket. Some say that cycle seems to have peaked out. We are in the middle and there is some more way to go as far as the metal cycle is concerned.
Should one buy beaten down names like Indiabulls Housing or DHFL?
Definitely. Both these names have corrected quite a bit and definitely and are very good value at these prices. Panic has been set in the market. Three-six months later when we once again sit back and look at it, maybe people will think that these were opportunities to go out and look at these stocks. As far as housing finance is concerned, I do not see a major issue as far as NPAs are concerned.
There may be some short-term liquidity issues but I do not see any big NPA issue. We have a long history of housing finance in the country and both these companies have very seasoned books. Dewan is a 40-year-old company, Indiabulls is more than 150 years old. I do not see any reason for such panic in the market. These are good prices to look at these stocks.
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