Will Adani Group stocks continue to do well in new year? Sandip Sabharwal explains

“I have no idea why these stocks moved up so much. It is very tough to predict but the key to sustain performance is always cash flow generation. If they go into cash flow generation, they might do well but the indications are there is more of a debt built up rather than cash flow generation. Whoever is investing here needs to be careful,” says Sandip Sabharwal, asksandipsabharwal.com

Where are you seeing potential when it comes to the railway space as well as individual stocks on the defence side?
n railways, there are a set of companies in the PSU basket. Normally I do not tend to buy many of them but there are companies which benefit out of railway capex. We have seen Siemens win huge orders from railways, we have seen companies like KEC International, Kalpataru build railways-related businesses to be a reasonably size business as far as their overall business goes.

Then there are wagon companies like Titagarh, Texmaco which have got huge orders. They might get new orders going forward and the next two-three years’ visibility looks good. The entire space overall should do well related to the railways. Some of the railway PSUs might also do well but I do not track many of them.

One space which is coming under pressure today is cement stocks like Shree Cement, JK Cement and a couple of other names. They are all down in trade. Should we make anything of the weakness in cement names today or should this dip be looked as a buying opportunity?
I am personally not looking to buy into cement because I believe that over the next one or two years, the capacity addition is going to be much more rapid than the increase in demand and as such even now there is oversupply in cement but due to pricing discipline prices have held on.

I think many of the groups are expanding very rapidly after the entry of Adani. We could expect that ACC, Ambuja will also start expanding more rapidly. In the next two years, we will see significant supply and demand increases at a steady pace. So pricing and margins could come under pressure. Cyclically they will keep on moving up and down but long-term directionally, I am not playing cement at this stage.

What is the outlook on the Adani Group of stocks given the massive wealth creation that we have seen in this cluster? Given the acquisition spree, does 2023 look very promising?
I have no idea why these stocks moved up so much. It is very tough to predict but the key to sustain performance is always cash flow generation. If they go into cash flow generation, they might do well but the indications are there is more of a debt built up rather than cash flow generation. Whoever is investing here needs to be careful.