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Economic Times
01-08-2025
- Automotive
- Economic Times
No structural negative in Indian pharma seen, FMCG companies chasing margin: Pankaj Pandey
Pankaj Pandey shares insights on various sectors. Pharma companies are focusing on specialty products. Generic drug pricing pressure is expected to continue. FMCG companies are shifting strategies to chase margins. Cement sector is showing better numbers. Hotel sector is also performing well. Auto sector is selectively positive. Food segment is expected to show double digit growth. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads , Head Research,, says Indian pharma companies are focusing on specialty products for growth. Generic drug pricing pressure is expected to continue. FMCG companies are shifting strategies to chase margins. Global sectors may face pressure, making FMCG a better trading option. The food segment is expected to show double digit growth. Indian pharma faces US exposure, but structural negatives are not expected.I do not have coverage on Swiggy or even Eternal and so would not be able to comment. But some of the numbers which I have liked like Ambuja are again talking of Rs 350 per tonne of improvement and the volume growth is higher than the industry. So, cement as a pack has been coming out with a better set of numbers. We have been liking most of them and then Chalet again came up with a very good set of numbers. So, it is not really comparable from a YoY basis, but if you look at the hotel piece specifically, we have seen a high teen kind of a growth in the revenues for hotel business, margins have improved, so that is fact, we like hotels as a pack and overall most of the numbers have come out on expected auto, we are selectively positive. In Maruti, again a muted set of numbers. The only reason we are positive on Maruti is because we are hopeful of the fact that probably in the festive season, even Maruti might be able to deliver better growth than the industry. That is the only Eicher Motors came out with a decent set of numbers and they are also looking quite constructively, especially in the festive season and TVS also came out with a good set of numbers. From that perspective, one needs to be very selective in the overall results. But the result in general is lacking the spark to lift the market higher and which is why we are continuing to see consolidation in the market because of tariff-related the pharma side, all global majors will have a lot more challenges given the fact that some of them are housed in Ireland which again is a tax haven and obviously there are some challenges with respect to pricing which is what Trump is domestic manufacturers or even for exporters, largely the template seems cut out. For example, most of the companies have started to focus on the speciality side, like we have seen in the case of Sun Pharma and their global specialty sales have grown at about 17 odd percent. Domestic growth was 14 odd percent. From that perspective, overall, our sense is that companies have started to become selective in terms of growth and generic is where we do not expect much of a pricing leeway that India can is why we are not too worried from that perspective because all these tariff related noises are going to continue for a good period of time even for countries which have done the trade deal. A lot of details are still not available. You cannot pencil down your numbers on this basis and mark down the the sense is that though Indian pharma is exposed to the US and a sizable chunk too, there are no major alternatives for generic medicines like what US might be expecting. So, from that perspective, a knee-jerk or sentimental reaction can happen. But we do not see a structural negative that is going to pan out in pharma the FMCG front, they have changed the template. Earlier the growth was driven by premiumisation which is where we have seen volume growth tapering off for even a big player like HUL and as a result, the margins were on an elevated they are looking to chase margins and which is why we have seen for a company like HUL, quarter-on-quarter volume incremental improvement of about a percent. So, my sense is again given the fact that some of the global oriented sectors are expected to witness some kind of a pressure, so your FMCG becomes a better trading I am still not very convinced in terms of a very high growth rate for this sector, and so a sum total both pricing and volume growth is still going to be low single digits or probably mid-single or slightly higher depending on the case but in general this sector is not expected to outperform. Selectively, we are positive on a company like say Tata Consumer or Marico . The food segment is again expected to deliver double digit kind of growth and that looks sustainable, otherwise one needs to be very selective in FMCG as overall space.
Economic Times
06-05-2025
- Business
- Economic Times
Earnings to be better in cement and steel sectors in medium term: Pankaj Pandey
Pankaj Pandey suggests that while Q4 earnings were subdued, FY26 looks promising, particularly for the commodity sector. Cement and steel are highlighted as potential outperformers due to expected earnings improvements and price increases. He also notes the positive impact of declining crude oil prices on OMCs and other user industries, emphasizing the structural benefits for India. Tired of too many ads? Remove Ads Also Read: Beat the market with this passive Nifty investing approach Tired of too many ads? Remove Ads , Head Research,, says earnings in the cement and steel sectors are poised for improvement, making them attractive investment options. Cement companies have already shown promising Nifty growth, while the metal sector holds potential for a positive surprise. Price increases of Rs 5,000 to 6,000 across the board are expected to significantly benefit metal companies in the first are right that in Q4, the overall anticipation was pretty subdued. From that perspective, earnings are not a big miss. Yes, things could have been better. But our sense is that FY26 looks a lot better. If you look at FY25, we had largely a single digit market appreciation and a similar earning growth. But FY26 looks a lot better, especially from the commodity pack. You are seeing quarter-on-quarter improvement and FY26 looks a lot better and overall sense is that earnings are expected to be in low double digits, about 11-12 odd that perspective, a similar market return is expected and from that perspective, the earnings have not been a big disappointment. I would like to highlight that this becomes more of a stock specific scenario. For example, in auto, M&M is delivering high teen volume growth whereas a lot of other players are witnessing degrowth. So, it has become a very stock specific this order pertains to the innovator drug as the destinations mentioned are sources of innovator drugs. So, from that perspective, we do not really see too much of an impact on the markets for us because we are largely a generic supplier and on top of it, we are doing fairly well in terms of negotiation. From that perspective, I do not see more of a knee-jerk reaction. This could have far more implications for Europe or other places from where the US sources bulk of their imports.I do not rule out a scenario where you see higher scrutiny from FDA and that has gone up in the past few years. So, that is very much possible. Relatively our sense is that when you talk of other competitors like China, our sense is that we are relatively better placed, but yes there is still some uncertainty around this is a sort of a wait and watch situation and on top of it, we are seeing some of the companies looking at having some kind of a satellite manufacturing capacity in the US. That might also mitigate the overall good part about crude price is that now major players like Saudi Arabia are looking at increasing their market share. So, gone are the days when they used to ramp down production to maintain crude oil prices. This is structurally very positive for us because we import nearly Rs 10-12 lakh crore crude oil. Any kind of a price decline is a benefit whether it stays with the consumer or stays with the OMCs will benefit from this aspect and the other aspect is that in case of a rewiring of the LPG supply chain, this is positive for all the OMCs which is where we feel that things could be better. For a lot of other user industries like FMCG, the benefit will start accruing from Q2 onwards and similarly in a lot of other sectors like cement, where our sense is that even the petcoke prices could soften.A lot of beneficiaries will emerge over a period of time, but crude oil prices are declining and countries are not really competing and not restricting prices is a big positive for us. It also helps us in case a fiscal side war escalates and something happens, we are fiscally far better positioned to undertake any kind of a financial impact as well.I like the commodity pack – both cement and steel. These are the two sectors where the earnings are going to be better and Nifty growth and numbers have come out especially on the cement company side, we are liking that and metal could be another surprise element because we have not seen that much of a price performance. But that is another sector where we sense that much of the benefit has not really flowed in Q4, but Q1 is when we are going to see the benefit of about Rs 5000 to 6,000 increase in the prices across players. So, these are the two pockets that look relatively good to us.
Time of India
06-05-2025
- Business
- Time of India
‘Sell in May and go away' or stay put in the market? Pankaj Pandey answers
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads , Head Research,, says despite potential knee-jerk reactions from geopolitical developments, the market is expected to recover losses within a few months. A constructive outlook is maintained, particularly for sectors like banks and oil & gas, where foreign institutional investor selling has largely subsided. Overall, conditions are favorable for future market we have seen that out of 12 sessions or 12 months, nine months have been positive to the tune of about 2 odd percent. I really do not subscribe to that statement, but the overall sense is that since we are still seeing developments on the geopolitical side, it is very much possible that the market might witness some kind of a knee-jerk reaction. But in general, our sense is that in two or three months, the market largely recoups most of the losses. So, we are carrying a very constructive view across the markets and some of the categories like banks and oil & gas, where the bulk of the FII selling was witnessed, is also behind us. All things are falling in place for us to do well going we started, there was very low expectation of Q4 shaping up well. In the overall FY25 growth rate for EPS or overall EPS growth was expected to be about 4 odd percent. Numbers contrary to that are slightly better especially when I look at the commodity pack. Cement quarter-on-quarter numbers have been better for most of the players which have come out and steel is relatively better. Our sense is that it is going to get better in oil and gas is going to get better Q1. The commodity pack is doing well and this is one pack which can be looked at. Banking has done well from a price performance perspective and if we go in for a rate cut of say 50 to 100 odd bps, somewhere down the line margin pressure is going to be visible in the first might take a back seat. It is not really negative because FY27 things will start looking up. Most of the domestic-oriented sectors are looking good and what we are sensing is if the wallet share goes up with the tax cuts in picture, some of the consumption categories like hotels or hospitals or autos and to some extent even the AMCs or the real estate as a segment are picking up. It is largely a stock pickers' way we look at it is when the peak of the tariff uncertainty subsided, we have seen a 10% rally in the market and for a lot of customers, there is an overall sense of missing out in terms of that particular case we get a knee-jerk reaction because of the Indo-Pak situation, this will be another opportunity to look at good quality stocks at good valuations which make an overall sense that there is no panic in the market. In fact, we have been advising customers to look at this as an opportunity because structurally I do not think it is going to derail the overall trajectory of the markets or the overall economic growth. Economically, we are far more sound to withstand any kind of challenges coming from it.I am sorry I do not have coverage on Cummins India and cannot really give a view. But what we are liking are bearing companies – be it Timken or other players. These players have seen decent price corrections, valuations look attractive, and post Schaeffler numbers, things are looking a lot more constructive on the auto and industrial side as has already seen a decent price performance. Our sense is that they will be able to maintain ROAs of about 2.2% and that means if you are giving a slight premium at about 2.4%, our target price for Kotak comes at about Rs 2,400. While growth is on a slightly lower side and same is the case with SBI compared to the overall growth expectation, the growth is slightly on a lower side. But SBI is another bank where we feel that within PSUs it can deliver ROAs of 1 or 1.1 and which is why we feel that the valuation looks relatively there could be challenges in the first six to nine odd months in terms of margin pressure given the anticipation of rate cuts, but since FIIs are no longer negative on a segment like this, we would want to be more constructive and any kind of a price decline is a buying opportunity. So, from that perspective we are positive on both these stocks.
