What Are The Key Stocks & Sectors In Focus Today? | Market Cues With Dipan Mehta Of Elixir Equities

[00:00:12]Welcome back. Hope you're having a good morning. Well, to help us out with some stock specific you know, analysis. We now joined by Dipan Mehta who joins us on the show. Hi Dipan, good morning. Hope you're having a good one. Looks like a bit of a tricky one for our markets given that Brent crude prices have spiked up. Let's talk about a couple of earnings reactions. Then Eternal actually was the one that came late with its numbers. You know, towards the close of market. Initially the stock sold off, but then the fine print didn't look so bad. In fact, to some it looked quite positive going by the growth that they saw. The margins were a little bit you know, lower than expected.

[00:00:46]Your view on the stock added on this 280 to 290 rupees?

[00:00:51]>> I think Nigel, first of all, good morning and thank you for having me on your show.

[00:00:55]It's a company in which we have invested so have our clients for major disclosure. But you know, these are long-term stories and you will have these aberrations quarter by quarter. Also the business has become quite complicated with big commerce as well as with the food delivery business and then they have other allied businesses as well. So rather than looking at this company on a quarterly basis, I think it's better to just let the management have the kind of comfort to run it on a longer term basis because there are huge consumption shifts happening which is clearly benefiting Eternal. And also the competition keeps coming going. That was another challenge. But on the whole, I think I would remain invested in the company and maybe at corrections also look at adding the stock. But this is truly a nice long-term story. It's a perfect play on consumption and rather than buying the FMCG stock, I would prefer to buy something like an Eternal which is gaining market share in terms of you know, their their pricing power and also market share in terms of the actually what what the services they are offering.

[00:01:59]>> Mhm.

[00:02:00]>> Uh Deven, hi. Good morning. Uh you know, [clears throat] the other one is IndusInd this morning, right? Numbers are all great and all round beat across the board. But the point is uh the stock's done well from the lows.

[00:02:13]Valuations are not cheap. And you know, every time IndusInd comes up, you can either play the turnaround or you can play you know, stocks the bigger ones well settled doing well which are which are already you know, those are not turnarounds.

[00:02:29]Those are those are steady performers like ICICI Bank for example.

[00:02:34]I mean, somebody even say HDFC Bank.

[00:02:36]HDFC Bank perhaps is a turnaround candidate at some point. What's your sense?

[00:02:41]>> Well, I think IndusInd Bank has done so much of damage to investor sentiment with continuous one after another over the years. Some problem or the other with NPA or with some other accounting issue or something or the other.

[00:02:55]That I think and considering that you have so much of choice in the banking industry, from my point of view, we have avoided IndusInd Bank from some point of time. We were investing in the company for many years, but the returns were highly substandard because something or the other would keep going wrong. So, from our investors' perspective, I would avoid IndusInd Bank. Eventually, I would give it a lower valuation than even than an HDFC Bank or ICICI Bank for that Bank for that matter.

[00:03:20]And from time to time, it does get cheap.

[00:03:23]There's no doubt about it, but it's really a value trap. And I think that it's best avoidable. In the banking industry, there are a lot of choice. I think the PSU banks, the mid cap small cap PSU banks, they have delivered exceptionally good results.

[00:03:37]And to an extent, I think the results are better than private sector banks also. I'll prefer those companies and then of course, there is the multi-product NBFC where I think the again gaining a lot of market share at the expense of banks because of their flexibility. So, you have to play the entire lending business highly selective.

[00:03:54]>> Yeah. No, although I must say that with IndusInd uh there is uh there is the there's top management change basically, right? I mean, corporate banking is about the people who run the business, who give out the loans. Uh so, Rajiv Anand is now of course heading and a fair bit of cleanup has happened, but it'll take time. Uh and you know, Q1 has been good, but uh as you said, perhaps there is a lot of choice, no doubt about it. You know, look at what's happened with names like Bandhan, etc. I mean, that was the other uh other one, right?

[00:04:24]New management on at the helm. Maybe, you know, that as they say, turnarounds rarely turn, but maybe a bit unfair also to make that generalization.

[00:04:34]Uh is it a timeline seem to have been stretching out from what what one assumed earlier?

[00:04:41]Uh any thoughts here?

[00:04:43]>> First of all, you know, uh banking industry is not as easy as it was maybe 5 years, 10 years ago, or so.

[00:04:50]Where every bank, you know, could go and get their 25% top line net interest in net interest income growth.

[00:04:57]Net interest margins were healthy and they were all getting covered by strong pre-provisioning profit. That's not the case just now. It's a complete red ocean. There it's highly competitive.

[00:05:08]So, if a bank tries to grow too fast, then it is compromising on the quality of its assets. And if it becomes too conservative, then the growth comes to single digit, or so.

[00:05:17]So, unless you have a very strong USP, a very strong position, could be geographical, could be a specific product, I think it's going to be very difficult. After some time to time, you will have such uh you know, I would say minor disasters within the banking industry. And Bandhan Bank is just one of them, where they now say that, you know, because of the competitive intensity, I think that's the underlying reason. Uh they have to reduce their return on asset. So, we have to be very careful in this industry, and either you go with the blue the blue chip DSP the HDFC bank or ICICI or then you diversify into smaller bank or preferably for banks like AU small finance bank, IDFC first bank.

[00:05:58]You know, but those also have had their own set of challenges.

[00:06:02]So, as I said I think the best way to play this is to be highly selective. And look at the NBFCs I think where I think there's better scope for growth.

[00:06:11]>> Mhm.

[00:06:11]In moments from now Depan, we'll get chatting with the management of CSB bank. So, you'd want to stay tuned in for that as well. But any thoughts on Oracle Financial Services? Now, this is a company which doesn't do conference calls. So, there's scant details available. We only get the quarterly revenue numbers, margin numbers. But very very strong this time and EBITDA margins hitting 60%. What are your thoughts on OFSS?

[00:06:34]>> Well, I think it's a great story and it's got a clearly highly differentiated business model. And these numbers come through because whenever they sell licenses that has got very high operating profit margins. And then these licenses also get tertiary revenues which kind of grows the business from time to time. But you know, last two three quarters have been exceptionally good because license sales have been very strong. But you should be prepared for quarter or two where license sales also may dip. But on the whole on the longer term basis I think Oracle Financial has a much better sort of opportunity to grow and deliver better returns than some of the large cap IT services companies or a few mid cap IT services companies as well. So, I would prefer that within the software industry if you have to be selective and you have to be invested then certainly Oracle is one of the companies you could consider.

[00:07:24]>> Mhm.

[00:07:25]Depan, what about MedPlus?

[00:07:27]You know, yesterday the stock got absolutely pummeled.

[00:07:30]But it came off the lows a little bit.

[00:07:32]And you know, post I was just reading a couple of notes post market hours in the con call, the management says that they're pulling back on that capex guidance. You know, what the street didn't like was that the numbers were disappointing. And what they didn't like was diversification, you know, putting some money in an unrelated business. And that's why the stock pulled back. Now, they pulled back on that capex. Do you have a view on the stock?

[00:07:55]>> No, no, what I didn't like was that the gross margins have come down.

[00:07:58]And in a stable business, in a feeding business like this, why should the gross margins contract? So, I mean, that's very surprising. I'm sure there was an answer for that. I mean, I missed it.

[00:08:09]But on the whole, I think that it was the company which I was looking at quite positively till we got this quarter's number. And that was very disappointing.

[00:08:16]And that kind of, you know, uh uh wants you to reassess the entire business model and the growth prospect and the growth dynamics of the company.

[00:08:25]So, I would just wait and watch Metropolis for some more time. Really understand what are the way forward for the company.

[00:08:31]Uh because end of the day, I think, you know, scale is coming into play. And basic fit is coming into play. So, because more and more difficult to have higher growth when you've already covered so much of territory. So, I would just wait and watch and keep it on the sidelines for the time being.

[00:08:46]>> Mhm.

[00:08:47]Uh >> [clears throat] >> Okay, Nagesh, I didn't see that. You're saying that they've uh they're saying they won't spend 100 100 crores.

[00:08:52]>> There was a con call at 4:00 p.m.

[00:08:53]yesterday. Uh in the con call, I can't see it on the exchange, uh you know, with regard to a comment particularly on this capex. But I've confirmed that, you know, a couple of notes that have come in early this morning. They have pulled back on that capex because the street was unhappy about it. So, the private labels, obviously, that was lower. The margins were lower.

[00:09:09]>> know exactly how much they're scaling back or completely canceling it.

[00:09:12]>> it.

[00:09:13]>> Yeah, so I'm reading the Nomura note.

[00:09:14]The capex plan that was approved by the board yesterday for investment in food park and the oil extraction unit, 40 crore, and the concierge health wellness service, that's 90 crore, has been put on hold due to negative reaction from the investors.

[00:09:27]>> Yeah, I think uh uh you know, let's let's let's put this information out.

[00:09:32]We'll we'll have this up at the bottom of the screen in terms of uh flashes.

[00:09:37]Uh so, this is this is material and this is important as well. By the way, you know, uh the management joined us pre-market, I think at about 8:30 around this time yesterday when they actually laid out all that. I mean, basically a missing numbers, but we basically focused on this capex and why this is going uh and that is essentially uh what the market is not liked and the company reacting to it put on hold. As I said, we'll put uh some of this up uh in just a minute.

[00:10:03]Maybe uh you know, why don't we try and reach out to the MedPlus management as well for a quick uh uh you know, interview so uh that we're able to clarify some of this stuff.

[00:10:13]>> And even on yeah, even on margins, what the Nomura note says that I think the management told us this. They have adjusted their discount structure. So, effective 7th of July, the company has reduced the discount rate to 19% from 20% for sales over 1,000 for non-UPI payments. This should aid margin improvement. The management has stated that it should be able to meet or exceed its target of achieving uh 440 crore of operating EBITDA in FY27. So, allaying some concerns even on the gross margin decline.

[00:10:40]>> Okay, we will try and put the MedPlus management uh on once again uh to uh understand what they've done.

[00:10:46]Uh I I don't I don't know if you have a view on any of these, a strong view rather, uh Deepan. Uh so, so come in there, but I want to also ask you about SBI Funds, which is now, after yesterday's uh you know, yesterday was day two uh post listing, is about 10 rupees away from its IPO price of 574.

[00:11:04]Uh so, yeah, autos, if you have any thoughts on this uh this one.

[00:11:09]>> Yeah, Prashant, I think autos continue to surprise. I really wonder how long such growth rates can last because end of the day, it's it's a bit of a mature industry as well. But, for the time being, I think numbers have surprised us.

[00:11:20]Uh and especially, I was very impressed with TVS Motors uh that they have TVS Motors is gradually expanding the contribution from exports and from EVs. And I think that that's a becoming a new growth engine and one advantage which TVS has over the other auto companies is its subsidiary company which is into lending and that business also scaling up really well. So, although it is expensive, I think TVS Motors for the last 5-10 years has outperformed on all parameters versus the peer group. So, that is one company which is our preference. Again, disclosure over there. And the second thing you were asking about was I lost the question. What was it about?

[00:11:59]>> Uh SBI Funds, Dipan.

[00:12:01]>> SBI Funds, yeah.

[00:12:03]Basically, yeah.

[00:12:04]Yeah. So, I think SBI Funds is a good steady investment opportunity. But, look, there are so many AMC's already listed. Again, it's a highly competitive industry. And if you want to play the financialization of saving and investment theme, we have to go for stories where the competition is less or it is monopoly situation. So, prefer the exchanges. Of course, we have NSE also which will be listed soon. Prefer some of the R&T agents and registrar companies like, you know, we have Carvy and we have CAMS. So, those also I think can provide steady growth. And then you have the wealth managers where I think that because of the wealth effect and because of flexibility of the business, I think they should do well.

[00:12:45]The insurance companies and the AMC's are all the way down in the pyramid because of the competitive intensity and also because of regulation threats. But, nonetheless, I think they're steady performers. You will get your returns which are in line with the broad market index.

[00:13:01]>> Dipan, I want to ask you about IT also.

[00:13:02]Infosys reports later today and you know, I'll we'll ask Rima to put out the preview in terms of street expectations.

[00:13:09]I think there's some 2% constant currency growth expected, but we'll see.