The Economic Times daily newspaper is available online now.

    Next 5-7 years offer aggressive visibility for industrial, capex theme: Deven Choksey

    Synopsis

    “2023 would be the year in which people will probably put money in companies where they have shown the ability to create newer models and particularly the electric vehicle models. If Bajaj Auto is saying that they would launch two or three new vehicles in the current year, it is quite possible that we might see a surprise coming in from Bajaj Auto in this particular two-wheeler pack.”

    Deven Choksey2-1200ETMarkets.com
    “I would not be surprised that somewhere before 2030, Reliance could be inching closer to seven, seven-and-a-half lakh crore kind of EBITDA and that is where we are arguing that if you are investing for the next 10 years, such kind of opportunities cannot be missed out in the portfolio,” says Deven Choksey, MD, KRChoksey Holdings Pvt. Ltd

    NTPC and Coal are both PSUs and energy-dominated stocks. There was a shortage of coal and power, which led to rerating of some of these stocks. In 2023, what happens to these stocks?
    In the case of Coal India, significant efforts have happened in building production which was up till now lagging and that is possibly one of the reasons for which one can count on Coal India for the volume that they are now producing versus earlier periods. The bottlenecks on the logistics side have also been removed to a greater extent to a proper transportation mechanism and that is also resulting in a timely supply of coal to the power plants, which are again helping them.

    Along with that, the e-auctioning of coal also is helping them. But one important point which I would like to bring to the notice is that earlier, to a greater extent, most of the funds stayed away from the fossil fuel businesses and as a result, there was less preference for coal as a commodity. Last year typically saw the surge in the coal prices in the international market and to my surprise, many of the global funds changed their approach and instead of saying no to the fossil fuel investment, they created another vehicle to invest in fossil fuel because green fund vehicle will not allow them to invest into so many of the global funds.

    Unlock Leadership Excellence with a Range of CXO Courses

    Offering CollegeCourseWebsite
    Indian School of BusinessISB Chief Digital OfficerVisit
    IIM KozhikodeIIMK Chief Product Officer ProgrammeVisit
    Indian School of BusinessISB Chief Technology OfficerVisit

    I think they started investing back into the fossil fuel under the argument that if the world has to move into the green, the possibility of burning fossil fuel would be very high because unless we burn the fossil fuel to create a new level of commodity and build the new world for the renewables, this is not going to happen. As a result, a large part of the money also went into coal, crude oil etc as far as I think the allocation is concerned.

    So this could be one of the main drivers of the rally because in previous years, it was less preferred as an investment opportunity. Last year due to whatever reasons, they went ahead and bought into the less preferred commodities like coal and crude oil and others.

    TVS is right at the top of the heap. Hero MotoCorp has no returns. If we look at Maruti versus M&M, M&M is at an all time high while Maruti struggles. How do you see TVS and Hero MotoCorp moving next year? Could there be mean reversion with TVS coming down and Hero MotoCorp going higher?
    Extremely difficult proposition because on the fundamental side of the business, in two-wheelers, the situation is yet to completely improve and give a convincing outlook as far as the business opportunity is concerned. But, yes, a higher amount of disposable income in the hands of people would revive the demand and allow more motorcycles or two- wheelers to be sold. But that is a wish list.

    In my viewpoint, 2023 would be the year in which people will probably put money in companies where they have shown the ability to create newer models and particularly the electric vehicle models. If Bajaj Auto is saying that they would launch two or three new vehicles in the current year, it is quite possible that we might see a surprise coming in from Bajaj Auto in this particular two-wheeler pack if you want to bet.

    It is a beaten down stock and has not performed in the last one and a half to two years and with the new launch of vehicles happening in 2023, it is quite possible that we might see a positive surprise in a stock like Bajaj Auto, something we experienced in TVS last year.

    We have spoken about a lot of names – Coal India, ITC, PSU banking. What happens to traditional names? What do you make of Reliance going into the next year? What do you make of some of the other traditional names that have not done well this year?
    Reliance continues to be a very promising story and the kind of business growth that they are producing on the numbers is even more compelling as far as the conviction is concerned. This year, the company would possibly end up reporting somewhere around Rs 1,30,000 crore worth of EBITDA which in a three to three-and-a-half-year times might double or be around Rs 2,75,000 crore EBITDA.

    So the size of the company has grown and is growing very deep. I would not be surprised that somewhere before 2030, Reliance could be inching closer to seven, seven-and-a-half lakh crore kind of EBITDA and that is where we are arguing that if you are investing for the next 10 years, such kind of opportunities cannot be missed out in the portfolio.

    I have analysed this company for a long period of time and I always believe that the opportunity is very big in this particular business. It demands a lot of patience because unfortunately in our market the larger counters, the bigger counters attract lots of traders and as a result, at times, the stock prices do not perform but when the opportunity comes to investors, should they remain invested and sit tight? It is quite possible that your next five-seven years’ investment portfolio would generate superlative returns for you.

    After the Covid breakout in China, the world thinks that it is going to spread to other parts of India. Should one revisit diagnostic stocks? Ultimately this business is contracting, it is growing at 15% instead of a peak rate of 25% to 30%.
    According to me, the world is not talking about the pandemic situation anymore. If at all there is going to be a Covid outbreak, it could be endemic. So, to an extent, one will have to balance this vis-à-vis what we saw in 2020. All the diagnostic companies probably are running between 30 times price earnings ratio to 80 times price earning ratios. In my view, the headroom for investors is relatively less, particularly when we do not have a similar kind of growth happening in the business; It is true this segment saw 25-30% kind of a growth in 2021. But that is no more the situation.

    From that perspective too, I do not think that the higher valuations justifies, maybe they had their dream run in last two years. As far as the valuations are concerned, they may get rationalised big time and might remain underperformers going forward.

    What about the industrial and capex theme which has been doing quite well this year? What to do with stocks like ABB, Siemens, etc, the railway capex theme?Are they still a good investment bet or have we missed the bus?
    Opportunity wise, the market is opening up for names like ABB, Siemens, Larsen and Schneider. They have invested heavily into technology and the infrastructure story is just unfolding. Yes they are absolutely at premium level but they have always been like this. I have never seen ABB and Siemens available at a valuation which is more compelling and undervalued. They have always been premium valued.

    The more important point is if India is spending Rs 110 lakh crore worth of amount on infrastructure building and then the heavy lifting has to take place in the infrastructure space, capital goods companies and technology companies which are basically supplying components and equipment.

    As for Honeywell, the company is positioning itself well in the industrial segment as well as the renewable segment. So from that perspective, this kind of businesses definitely would have higher amount of order book visibility and that would drive the underlying revenue and profits. A corrective fall in the market could become a buy opportunity at current levels or maybe further fall can take place. One could possibly buy with clarity. The next five to seven years offer aggressive visibility for the business of these companies.



    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more


    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in