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

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[00:00:00]That's how let's get in Deepan Mehta, director at Elekser Equities. Hi Deepan, good morning. Good to see you again. Uh Deepan, let's talk about Bajaj Finance.

[00:00:08]Uh you know, the numbers look quite good. I'm looking at a city note. They have upgraded the stock as well. The ROA is at around 4.5%. Uh they're talking about good growth, 22-24% or thereabouts.

[00:00:18]What do you make of the numbers? And what would your outlook be on the stock?

[00:00:24]Good Good morning and thank you for having me on your show. I think Bajaj Finance is the new HDFC Bank.

[00:00:30]Because the consistency with they are delivering these results is quite amazing. And it traded premium valuations, but look at the kind of de-risked business model which they have. You compare Bajaj Finance to any other NBFC and uh the kind of products which they have and how well spread they are, you know, whether it's consumer finance also or whether it is two-wheeler loans or four-wheeler loans, housing finance. All of it is pretty well diversified and that's what gives a lot of comfort. And despite having such a well diversified product to maintain these kind of uh credit costs is quite amazing. So, I mean, as a disclosure, we part of our core holding and we remain invested. It's a fantastic compounding compounding uh stock, if you ask me.

[00:01:12]Uh Deepan, hi. Uh morning. Yesterday, big moves in these QSR companies. A Sapphire, Devyani International, all surging on large volumes. Uh is that a space that interests you? It's disappointed in the past. They've the consumer discretionary spending slowed down. Growth rates were weak.

[00:01:27]But do you think it'll make a comeback?

[00:01:30]Yeah, good morning, Deepan. No, I don't think so. I think, you know, on and off, they may report a good quarter. But there are a lot of structural challenges within the sector as a whole, which is why these companies are looking overseas and doing mergers also over here. I think the best way to play the food business or the restaurant business has to be through Eternal or Swiggy, I think. And those numbers were very impressive, especially Eternal's numbers. I thought were very good. And although I think uh maybe revenues may start to slow down, but I think a lot of focus on the profitability. And all of these QSR companies, their business model has been uh kind of uh uh created challenged by the growth of the uh food delivery businesses. Because now there's so much of choice for the uh consumer to order food, to even eat out, or different different choices. So, that's why I think that the better way to play this restaurant and uh business would be through uh companies like Eternal and Swiggy and not through the QSR players.

[00:02:27]So, buy Eternal [clears throat] at 254?

[00:02:31]Only if you have a very long-term view.

[00:02:32]I think, you know, you need to be extremely patient. And uh you know, look for something like four-five-year type of uh investment horizon. But at the end of the day, I think this company has become solidly uh positive in terms of net profit. And even after that, four-five years from now also, it can sustain about 15-16% type of a top-line growth. And the focus is now coming onto margins. Uh where operating leverage also will play a very important role.

[00:02:59]Um >> [clears throat] >> uh All right. Uh Deepan, I wanted to ask you about what about these paint companies? You know, there was a price increase that was pushed through. In fact, a couple of them. And then you had Brent crude prices that cooled off to around $100. So, people were dancing away. They were saying that now they'll get the benefit. But now you have the input cost again that are expected to rise. And then the margin accretion may not happen. Though after the recent underperformance, some of these stocks relatively are cheaper. Uh your view on the space?

[00:03:29]And I think that is right. I think in terms of valuation, all paint companies are trading at historical low valuation multiples. But you have to account for the fact that there's increased competition within the space. And certainly, there's going to be a disruption in terms of supply of material as well as the cost. And it is not that easy for a consumer business to kind of pass on the cost increases. So, our view on paint remains neutral to negative.

[00:03:53]Got that. Uh Motilal Oswal Financial, IFL Finance, Ori came out with their numbers. KFin Tech also. Uh do you have any thoughts here?

[00:04:03]Well, I thought that Motilal Oswal and IFL Finance came with a great set of numbers. Both stocks are extremely attractively valued. Motilal Oswal is a great play on the wealth management business. Although, you know, we we look at it as a more of a broking company, but large part of the revenue is almost 60% is annuity type business. And it trades cheaper than, say, Anand Rathi wealth management or for that matter, any of the asset management companies like HDFC or ICICI or even some of the new generation brokers like Grow. So, from that point of view, uh very positive on Motilal Oswal. See, the numbers get uh somewhat confused because of the kind of in investment which they have made in the portfolio. So, it's mark-to-market uh optically causes the numbers to look do not look as attractive. But the underlying business momentum is very strong, so positive there as well. IFL, I think among the cheapest of the NBFCs, given its uh I mean, considering its size. And I think they've developed the gold financing business really well. A large part of the portfolio now is completely uh I mean, hedged in terms of secured, so that gives a comfort. I certainly feel that this is one company where the P/S can get re-rated at around 11-12 times. I think it is very attractively valued.

[00:05:15]Mhm. Yeah, and the management guidance was also pretty strong. 20 to 25% gold loan growth, 18 to 20% housing finance with consolidated credit costs in a range of 1.5 to 1.7%. Well, let's continue our chat with Deepan Mehta, director at Elekser Equities. Deepan, I wanted to ask you about ONGC as well as Coal India. Now, both these two are doing well because ONGC is a direct beneficiary of the higher crude oil prices. And Coal India, there is hope that finally volumes will pick up.

[00:05:44]And finally, there'll be some pricing action as well.

[00:05:47]Uh your view on both these two names.

[00:05:48]They're cheap. They've always been cheap. Are there enough triggers to get you excited?

[00:05:55]I think the trigger has to come from the government. And uh I think that uh this war that has created created urgency for energy security. And the two major vehicles for energy security have to be ONGC and Coal India. So, I think that if the government uh you know, takes the reins in their hand and does something like what they did in defense, you know, what happened in defense was that suddenly the focus came on the shipbuilders, it came on the PSU engineering, electronic defense companies, and we saw them become multibaggers. Something similar if it's happening in ONGC and Coal India, then you could see exceptionally good returns from these companies. But nonetheless, I think in markets like these, I think these companies are good safe bets. Uh very decent dividend yield. Very high level of comfort when it comes to the valuation. Only disappointment, of course, is the volumes. And once there is some clarity over there, that could become a trigger for these stocks to really well. So, I would say positive on both ONGC and Coal India. But for the moment, disappointed with the kind of volume growth we have seen. Largely, it's because of maybe efficiencies or higher realizations why we are seeing these numbers. Once we have you know, some sort of an inkling of how the volumes will play out, I think these companies can do pretty well and provide a multi-year outperformance.

[00:07:09]All right. Thank you, uh Deepan, for uh joining in.

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