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Economic Times
6 days ago
- Automotive
- Economic Times
Bullish on market but near-term consolidation can't be ruled out: Pankaj Pandey
Pankaj Pandey, Head Research, says market sentiment appears positive. The banking sector may face challenges initially. Recovery is anticipated in the second half. This could lead to depository pricing. Domestic liquidity is strong. Mutual funds hold substantial equity. This cushions the market from significant drops. Near-term consolidation is possible. Overall, the market outlook is favorable. Pandey further says that in auto, Ola's future hinges on its cell technology. M&M excels across segments, while Tata Motors gains favour due to its JLR business valuation. Eicher Motors is favored in the two-wheeler segment, focusing on volume growth. Despite income tax benefits, broad sales increases haven't materialized, necessitating selective positivity in the auto sector. On the two-wheeler side, they like Eicher Motor. ADVERTISEMENT HDB Financial Services is the first subsidiary of HDFC Bank which is going public. Up until now, HDFC Ltd and HDFC Insurance had gone public, AMC went public and those were part of HDFC Limited. Now, HDFC Bank subsidiary is going public. Pankaj Pandey: For us, the HDB Financial IPO does not move much of a needle for HDFC Bank. It might add about 2% to their book and about 4% of the overall price. Beyond that, we do not see much of a scope. In general, banking lacks trigger in the near term because a rate cut is around the corner and obviously, it will pressurise margin for most of the banks and which is why probably some of these banks are sort of yet not performing. Block trades power D-Street's stock trading value to seven-month high Although the PSU banks look slightly better given that their EBR linked portfolio is relatively lesser compared to private banks, in general not negative on banks but near-term triggers for banks to do well are missing. They have already done the heavy lifting up till now. What are you telling your clients now after the recent runup? The sale in May and going away did not work this time. Should one sell and go away in June? Pankaj Pandey: Actually, we have seen a rally of about 15 odd percent from the lows and we have seen a decline of about 3 odd percent. So, from that perspective, markets are pretty strong. Also, while on the earning side, we have seen a cut of about 6 odd percent for FY27, we are still holding on to our target price of Rs 27,000 on the Nifty, largely because we expect a relative positive arbitrage coming from the US-India trade. So, from that perspective, we are still holding to the bullish bias. A lot will depend on how things pan out and the overall sense is that once we are done with that, the second half is where we would expect things to become a lot better. Like I said, first half banking might witness pressure on the NIMs, second half is where we could expect the recovery which is where the depository pricing can happen. So, overall, the sense is that markets are looking good to us. Domestic liquidity also is good for us. Mutual funds are sitting on about Rs 1.50 lakh crore equity which would prevent a downside in the market. From that perspective, we are largely set to do well, but near-term, some consolidation can't be ruled out. ADVERTISEMENT What are you making of Yes Bank? Now, there is board approval for a sizable Rs 7,500-crore fundraise. Pankaj Pandey: We are not tracking Yes Bank so much, but even within the tier II private banks, whether it is IDFC First Bank or some of the other banks, we are still cautious on whoever has got exposure to microfinance. Probably there will be one or two more quarters of pain and that is when we expect things to look up. The block deals are abundant now whether it is promoter based or PE based. Do you think irrespective of the FIIs buying or DIIs consistent SIP flow, the liquidity will get neutralised because of fundraising? Pankaj Pandey: So, yes, it is possible to some extent because when you look at it, even the IPO market is looking set to be revived. Obviously some kind of liquidity will get consumed there and even with block deals, one needs to see specific cases. For example, in the case of ITC, it is very much possible that the weightage for them might go up and this is one of the stocks we continue to like within the FMCG pack, trading at about 22 times on a forward basis. So, it is very case specific, but I really do not see a lot of these block deals being negative. From that perspective, things are looking okay to us. ADVERTISEMENT Again there has been a dismal set of earnings coming in and after the block deal, we are seeing that Hyundai and Kia Motors which have been holding around 2.5% stake have taken a complete exit in this counter. The stock is trading below that 50 odd mark as well. What is your take, any hopes because a lot of retails have participated post the IPO as well. Pankaj Pandey: We do not track Ola, The only hope for Ola would be the technology they carry, especially related to cells. As and when they start putting that into use, probably there might be hope. But within overall auto, one needs to be very selective because when you look at the recent auto numbers, you have only selected a few companies doing better in terms of key beneficiary or key player is M&M which is doing well in most of these segments. We have started to like Tata Motors largely because while global uncertainties are definitely there and are likely to persist for some period of time, valuation-wise we draw a decent amount of comfort because international JLR business is at about two times EV by EBITDA. So, from that perspective, there are some select positives. ADVERTISEMENT Similarly on the two-wheeler side, we are liking Eicher Motors. They would be pushing for volume growth at the expense of margins, but it is a decent premiumisation play. In general, the benefit of higher sales is still not coming in because there was anticipation that post income tax benefits, numbers might start looking up. But that is yet to happen and that is why one needs to be selectively positive in autos. Any upgrades after the earning season? Pankaj Pandey: We have started to like a lot of stocks. For example, VA Tech Wabag looks interesting to us. This is one of the few companies in the water space. ELGi Equipment, again, is one of the few companies we like. We feel that with their product launches, domestically they will be able to overcome the Chinese competition. In addition to that, some of the cement companies like JK Lakshmi look good to us. In the last few years, they have grown at 4%. Now, our sense is that with capacity expansion they could be growing at about 8 odd percent. Lumax Auto is another company which we like. While the stock has run up, post correction, this is one of the few auto ancillary companies which is guiding for a 20% CAGR growth until 2031 and that looks good to us. ADVERTISEMENT HEG is another company which we like because somewhere down the line, a lot of these global companies or peers are witnessing challenges and either someone will go out of the business or the price for graphite electrodes can go up. HEG is relatively a lot better placed. These are some of the ideas we are liking. (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
15-05-2025
- Business
- Time of India
QSR growth faces headwinds as online food platforms capture investor focus: Pankaj Pandey
"When you look at steel as a sector, the context is that the price is at a four-year low, then we had imports at a 10-year high and with 12% kind of a safeguard duty, our sense is that for a company like Tata Steel which did somewhere about Rs 12,000 per tonne kind of a ebitda in the domestic side and with company guiding for a 3,000 kind of overall price appreciation, the numbers are going to get better for Tata Steel," says Pankaj Pandey , Head Research, As bullish the commentary maybe from Jubilant, the street has been more hooked up with the Q-Comm platforms, the online retailers when it comes to food delivery as opposed to the QSR traditional spaces. Do you think it makes sense perhaps to have exposure to both in your portfolio? Pankaj Pandey: So, see, from a consumption perspective, our sense is that the wallet share which is increasing is increasing for say hotels, hospitals, or even from investment side AMCs, unlike what you see for FMCG and other categories. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Trending in in 2025: Local network access control [Click Here] Esseps Learn More Overall sense is that a lot of these trades are crowded and so our sense is that there are two-three categories which are structurally looking positive. Demand is expected to be about 6 odd percent, supply is going to grow at 2%, and we have seen ARRs inching up and hospitals is no different. And the other consumption category could be on the premium side be it autos or be it two-wheeler or four-wheeler. And in addition to that within BFSI or non-BFSI segments, for example the AMCs look very attractive to us whether it is a largecap performing or midcap performing. Live Events These are the categories which we feel are expected to do a lot more better than a food delivery because that looks more crowded to us. Do you think there is an investment opportunity when it comes to steel, specifically perhaps led by Tata Steel? We were just looking at the numbers and they look pretty okay. The visibility for both the UK as well as the Netherlands business as well seems like FY26 is going to be the year, India demand in any case was intact. Pankaj Pandey: Oh yes. When you look at steel as a sector, the context is that the price is at a four-year low, then we had imports at a 10-year high and with 12% kind of a safeguard duty, our sense is that for a company like Tata Steel which did somewhere about Rs 12,000 per tonne kind of a ebitda in the domestic side and with company guiding for a 3,000 kind of overall price appreciation, the numbers are going to get better for Tata Steel. And even their UK business, the kind of cost reduction what they are taking, that will be visible in the next year. So, from that perspective Tata Steel is expected to do very well. We like the entire steel as a pack. Even Hindalco 's number, Novelis especially ebitda per tonne was better than our estimates. So, cement and steel are the two sectors where we are constructively seeing a material improvement on a quarter-on-quarter basis. Steel will see a better set of numbers in Q1. So, the maximum opportunities are going to lie there. I will not really say the same thing about the sail because see typically in a scenario when the prices go up, the most inefficient player sees the highest price appreciation. So, from that perspective, we would still want to prefer Tata Steel or JSW Steel or Jindal Steel & Power. How are you viewing the entire paint segment especially Asian Paints ? You think the negatives are all priced in because this is the one which had that big shake-off and pretty much got downgraded across the board and derated so to speak when Birla Opus came into the market. Pankaj Pandey: So, on the paint side, when I look at say Asian Paints, last two quarters the volume growth has been about two-three odd percent which is substantially lower than the long-term growth of low-double digit what we expect, while margin pressure is expected because Birla Opus is offering nearly 10% kind of a lower prices and while the price damage in Asian Paints largely looks done because valuation-wise it is trading somewhere about 44 times on a forward basis, but for us to look at this stock or the entire paint segment constructively, I think the volume growth needs pinch up. Till that time it does not happen, it is going to remain sideways or in case if the price intensity goes up, I would not rule out a minor correction as well from a price perspective.
Time of India
15-05-2025
- Business
- Time of India
BFSI remains a key driver of market resilience despite global jitters: Pankaj Pandey
"While the global cues or the global macros are still jittery because China is still attracting about 30% kind of a duty, but overall sense is that the worst is behind us, so we would want to believe that markets are headed higher in subsequent months," says Pankaj Pandey , Head Research, We were just debating whether this is the peak of the good news and whether markets have priced it in all at these levels. Pankaj Pandey: See, overall sense is from an earnings perspective nine months we have done about 742 odd, growth of about five-six odd percent. Last two days back when I checked, Q4 numbers are largely on expected lines. So, easily thousand kind of EPS would be achieved. We have seen decent improvement on quarter-on-quarter basis. Overall, sense is that the domestic flows in core categories are intact from a mutual fund perspective and also, from the FII perspective, a bigger sector like banking has seen good amount of flows and technology looks bottomed out, we are no longer seeing selling there. While the global cues or the global macros are still jittery because China is still attracting about 30% kind of a duty, but overall sense is that the worst is behind us, so we would want to believe that markets are headed higher in subsequent months. Live Events Why is that we have not seen too much of follow-up buying after that big Monday? I mean, the decks are now cleared for perhaps all the concerns in the market, all the clouds on the horizon they have faded away, yet the market is not showing lot of follow-up buying. The pickup from Monday has not happened. Pankaj Pandey: So, overall, when you look at FII flow, say if I look at NSE 100 as a universe, while BFSI contributes about 34% in terms of weightage, what we have seen is that the outflow is only to the tune of about 9%. Initially, we have seen good amount of flows largely into banking, but for technology and other sector our sense is that you really do not require that kind of flows and technology while price-wise it looks like it has bottomed out, but our sense is that somewhere down the line we are still not sure whether FY26 is going to be a washout year. So, from that perspective incremental flows are relatively lesser. But since FIIs are no longer negative, I take that as a bigger positive. What is it that you are making of the earnings which have come by, and I am going to start off with Eicher Motors . RE volumes, of course, have accelerated, they are looking at achieving the highest volumes in FY26, they are saying that the volumes are going to see a further pick up. Do you think that this is going to be one of the key beneficiaries of this entire premiumisation trend which is going to spill through to the two-wheeler segment as well and the fact that this has not really been performing with the likes of say a Bajaj Auto, etc, which have managed to actually move much higher in terms of a stock price action than what Eicher has done. Pankaj Pandey: So, we would want to believe that Eicher will do relatively better. If I go by the recent quarter performance, volume growth has been pretty impressive at about 24 odd percent. And monthly numbers are also okay. The challenge for Eicher has been margins, have been sort of weakish on a quarter-on-quarter basis. But overall sense is that the kind refreshes they have planned plus the CV business is expected to do well and they are already doing well in that particular segment, and so from that perspective overall the setup looks good for Eicher to do well this year. These drone stocks have now almost become ghar-ghar ki khani after what has happened, drones have become the new bullet now let me put it this way. What are you telling your clients now because everybody I am sure must be calling you or been wanting to know which is a defence stocks to buy which has drone or which is a drone company which they can buy, which can fly high. Pankaj Pandey: So, really do not have a company which caters on the drone side, but from a defence perspective, we are seeing structural shift. To give you some colour, say FY13 to FY22, we have seen acceptance of necessity of nearly 8.5 lakh crore. And in the last three years we have seen acceptance of necessity of over 9.5 lakh crores and subsequently our sense is that these will get converted to orders and you look at most of your PSUs be it HAL , Bharat Electronics , BDL Mazagon Dock, the overall order backlog is somewhere about six times FY25 revenues and on top of it this is not the end of the orders. So, for example, we are expecting about 65 crore worth of orders for HAL for Tejas. So, from that perspective, defence is something which we feel that is a buy on dip opportunity, any kind of a dip is a buy opportunity for defence, structurally this segment or this sector looks good to us.
Time of India
06-05-2025
- Business
- Time of India
Earnings to be better in cement and steel sectors in medium term: Pankaj Pandey
Pankaj Pandey , 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 quarter. What is your view on the overall earning season? Not many companies have outperformed the estimates. We went into this quarter with very subdued expectations. Do you think going ahead, once the picture gets a bit clearer, earnings will be the key catalyst to drive the markets going ahead? Pankaj Pandey: You 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 percent. From 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 market. What has been your reading into this? Do you believe this news flow could sentimentally impact the Indian pharma player, especially those who have a large exposure to the US market or do you believe that much is already in the price given the fact that we have been lingering and that overhang has been there for quite some time now? Pankaj Pandey: Largely, 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. The FDA will enforce better API source reporting. Do you believe some of the API players will be the key to watch out for given the fact that the players that you are talking about too are heavily dependent on China for importing these raw materials. Pankaj Pandey: 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 news. Live Events You Might Also Like: Beat the market with this passive Nifty investing approach It 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 impact. Yesterday, the OMCs had gains of between 4% and 7%. Following the cool-off in crude oil prices, would OMCs be the best play or is it time to look at some of the other sectors also? Pankaj Pandey: The 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 government. Obviously, 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. You Might Also Like: 'Sell in May and go away' or stay put in the market? Pankaj Pandey answers Which is that one sector which in the medium-term or so, will be a market outperformer to watch out for and lay bets on? It should not be banking. Pankaj Pandey: 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. You Might Also Like: Pharma shares slip up to 3% as Trump order to boost U.S. drug manufacturing rattles Indian exporters
