No point in buying Titan right now, betting on SBI Card: Yogesh Mehta

In case of Titan, PE contraction will happen over a period of time and we will have to wait for further correction. Rather than that, one can allocate the same investment amount into something else, says the Founder, Yield Maximiser.

Given the consecutive move in metal names, anything particular stands out to you?
Metal stocks are in the limelight right now because both the Chinese and the global pent-up demand is going up. The July month offtake is showing a good uptick year on year as well as month on month. If activities in the infrastructure and the construction space improve, then metal space should be a growth picker and in between that, there was a surprising number from Steel Authority of India and Tata Steel. Both are reasonably fine. I think in the metal sector, Tata Steel and the Steel Authority of India can be accumulated from here and can remain in limelight for some more time.

Are you a buyer in a stock like Titan where the selling and the stress is temporary? Will you buy Titan on every decline?
The demand for gold jewellery is getting lesser and lesser. The festive season as well as the marriage season both together are not working for at least for this sector particularly. So discretionary spending has gone for a toss and return of demand will take some more time because the major season of the third quarter and the second quarter are totally in doldrums.

There is no point in buying right now as a long term view or for the short term opportunity. One can easily wait and get into something else rather than getting into Titan particularly. PE contraction will happen over a period of time if not today but it will certainly happen and we will have to wait for further correction and rather than that one can look at something else to allocate the same investment amount into something else.

Is it too early to buy cement or do you think markets will factor in uptick in cement prices which will only happen in the next six months?
For cement, the demand has not returned but infrastructure projects and other commercial and residential premises are continuing. I think cement demand will inch up by only 4% to 5% at the best and worst case scenario could be minus 10%.

In that context, only the prevailing demand will happen over the next two quarters or maybe one year. That is why we see some interest in these cement companies but overall the raw material cost and the overhead expenses have been cut by all the cement companies that are the beneficiary for them this time in this quarter and may remain pertinent for over next one or two quarters more.

As a parking fund, this cement sector will be a capital protection kind and reasonable allocation should be there for cement. We may not see a big downside from here for at least next two to three quarters.

Which of the frontline private banks do you find attractive at these levels where there is still an opportunity for growth?
The fundraising activity from all the top four, five banks and now the book value will appreciate by 4-7% for each and the tier-1 capital will be better. Post Kotak, ICICI Bank is the one which has launched QIP. I believe that at this basic book value, this would be a great opportunity to get into and it seems that a little less than two times price to the adjusted book value is reasonable enough. The tier-1 capital also will go up to 16.5% and with this fresh round of funding, all clouds of uncertainty will be dispersed.

The recipe is very much right for ICICI Bank from here on. Over a period of time, we will see maybe 2.5-2.8 time price to book valuations and I will be expecting appreciation.

IndusInd Bank has raised capital, they have got good investors, the Hindujas are supporting the bank. So capital is not a problem. Why is the stock suffering?
For IndusInd Bank, there were many previous allocations of loan that they had disbursed and which are still not running out of their books. So a fresh round of funding is also getting into that and private equity players. Last month also we saw them willing to take 10% stake. These are already there as positives.

If we are looking at what is negative right now is the only that IL&FS issue and the telecom sector where they have got major funding and two three more corporate accounts which are turning into NPAs right now. The provisions are hurting the balance sheet numbers at present and we think that what can go wrong further from here, needs to be watched out for.

Once the stock made a bottom, it languished at Rs 450-550 levels. So post the Q1 number or maybe Q2 number onwards, we will see what are the developments in the balance sheet and the asset quality improvement. But till then, it will remain in this subdued state. Consolidation will happen and will remain subdued.

Any other pocket which is of interest to you right now?
We have already spoken of many sectors but individual stocks, I would say SBI Card. The IPO came six months back and the it was quoting at around 10 times price to book but it opened below that due to the Covid situation.

The management has sounded confident post Q4 numbers. The total card spend is returning to almost 65% of pre Covid days. Nevertheless, the train booking and the air booking is majorly contributing. Plus entertainment has not returned to normalcy. Once it returns, then everything is priced in right now. We may see some 20-23% kind of return from the current levels over the next one year. That is the investment idea I am looking forward to.