Playing the megatrend? Hemang Jani on best bets in renewable energy

The renewable energy theme is catching up big time. The kind of money which is being put in both in the existing equity as well as by the private equity players in the emerging companies, it is mind blowing, says Hemang Jani, Equity Strategist & Senior Group VP, MOFSL.

The clean fuel and ESG megatrend is here. What is the best way to identify the next outperformer or the next multi bagger?
Both globally and in India, the renewable energy theme is catching up big time. If you see the trend in terms of the kind of money which is being put in both in the existing equity as well as by the private equity players in the emerging companies, it is mind blowing.

I think this is going to be the theme to look at from a next three to five year perspective. In India, we have very limited options or opportunities to participate in this theme. Among some of the names which appear very compelling, number one is Tata Motors. There is a clear cut focus on the EV segment. The new money that has come in is definitely the icing on the cake. Coupled with that, the kind of revival that we are seeing in the global passenger vehicle market would bode well for a company like Tata Motors.

The other names that we like in the same space would be Tata Power because of the kind of lineage and focus that they have. We feel this was a very boring business for a long period of time and now because of the focus on renewable energy, people are getting excited. We do not have much clarity about how much business this new segment will contribute but given the focus of the management people are getting excited.

There are certain companies in the chemical space and clean science and technology is something that will fit into this theme and has done extremely well. But there is a long way to go given the opportunity which is lying ahead. Currently these are two or three names that we are comfortable buying into in this theme.

CG Power is up 4x in less than one year?
Though we do not cover it, I think it is a classic case where there was a bit of a question mark on the promoter credibility and the way the management dealt with the debt issues. Post new investors coming in, there is a sense that there is going to be a much better turnaround.

What is happening in the last one quarter or so is that the entire narrative around the capital goods sector and the revival one is really catching up. So maybe people like CG Power with its focus on certain solutions in terms of the utilities, industrials and consumables. Even companies like L&T, Siemens and a whole host of midcap companies in the capital goods space are seeing good traction. The theme and expectations of revival around capital goods is driving up these stocks.

You have initiated coverage on the entire logistics sector now -- TCI Express, Transport Corp, VRL Logistics. Why logistics, why now and why these three names?
We are seeing the emergence of the new tech age companies which are funded by the logistic operators and we have seen that there is a strong case for a revival given the overall growth that we are seeing in the economy. In some of these companies -- be it a B2C company or end-to-end logistics management company -- the overall growth visibility is going to be very strong and we feel that particularly companies which are doing value added services like 3PL and express businesses are extremely well placed.

We have initiated coverage on three companies. TCI Express is something that we like and where we are looking at about 20-24% growth over the next three years. Transport Corporation of India is a multi model play that we like from a long term perspective. We see very strong growth of about 18-20% over the next three years. We like Blue Dart but we have a neutral rating at this point of time. Even in Mahindra Logistics, we have a neutral rating. The other one that we like is VRL Logistics which is an asset ownership play and there we expect very strong growth.