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    Is this a good time to accumulate IT stocks? Hemang Jani answers

    Synopsis

    “For ITC, we are looking at about 19% kind of growth in the EBITDA and their non-cigarette business also will continue to do well – be it FMCG, paperboards and hotel business. In the cigarette business also, we are looking at a steady state kind of growth. We continue to have a positive bias there.”

    Hemang Jani-NEW1-1200ETMarkets.com
    “The IT numbers have been good and in some cases we have seen guidance being upgraded. We see much better risk reward here. Any major global issue in terms of some event affecting the tech spend is the only risk which is not currently priced. Otherwise, this is a good time to accumulate IT names,” says Hemang Jani, Equity Strategist & Senior Group VP, MOFSL.


    What is your view on PSU stocks? Not only PSU banks, even BHEL, HAL, NHPC as well as REC were abuzz in yesterday’s trading session. Is this pack emerging with strong value?
    PSU banks definitely are doing exceptionally well and it is a combination of the way some of the companies have delivered numbers and the entire credit growth offtake along with much better NPLs, that is helping the sentiment.

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    In terms of valuations, this space is relatively attractive. We continue to like State Bank of India, BoB and Canara Bank within the PSU banking space.

    Coming to the other part, yes the defence space, particularly in Bharat Electronics and HAL, we have seen very strong action in the last six months and the way the companies are getting the order flows and the fact that we will see far bigger focus because of the geo-political issues means that some of these companies actually will be doing very well over the next two to three years.

    I think the entire space will continue to be good including the capital goods companies. We continue to have a positive bias on some of these names.

    What are you anticipating from IndusInd Bank numbers? More importantly, if it turns out to be a line set, does the stock continue to be a buy or a hold for you in the next one year?
    It is one of the much better performing banks in the second tier category that we have and in terms of growth, it will surprise most of the consensus expectations that are there. We are looking at about 25-30% kind of a growth in NII and the very strong credit growth also. We think that despite the very strong performance that the bank has been delivering over the last three to four quarters, it continues to trade at somewhere around 1.4 price to book which is not capturing the real performance that the company has been delivering.

    It continues to be one of our preferred picks in the second tier category and even post numbers, the banks should really do exceptionally well. We are looking at about 23-25% kind of an upside even from current levels when it comes to price target.

    Do you think IT has corrected enough and is the negative news now baked in into the price? Can IT be a buy now?
    Definitely there are two aspects over here. One is how the quarterly performances have been for the numbers that have been out. If you look at the majority of the numbers starting with TCS, Infosys, HCL Tech and even some of the midcap companies like Mindtree, LTTS have all delivered very good sets of numbers and they were slightly ahead of expectations in terms of consensus though Wipro was a bit of a dampener.

    So clearly the numbers have been good and in some cases we have seen guidance being upgraded. Coupled with the kind of correction that we have seen at the broader level – at index level, the sector was down almost about 30%, stocks were also down similarly, we do see much better risk reward. If there is a major global issue in terms of some event affecting the tech spend in a major way, that is the only risk which is not currently priced. Otherwise, this is a good time to accumulate IT names.

    Do you think the dream run that we have seen for the real estate pack over the last 12 months will sustain or given that interest rates are rising, it might plateau at some time? What is your take?
    The sector has done well when you look at the last two years but in the last one and a half months, the stocks have corrected by almost about 10-20%. Our take is that the interest rate hike did not have any material impact so far. When we are talking to the managements, they are sounding quite upbeat in terms of new project rollouts or their presales and other operating parameters. We see this correction as a good opportunity to enter into the names like Prestige which announced the numbers and Lodha which is predominantly a Mumbai-based real estate developer. We think that overall from the next one or two years’ perspective, this space is looking extremely attractive in terms of growth.

    What is your take on the hospital stocks?
    In hospitals, we continue to have a very positive outlook and we think that for the next two to three years, we will continue to see a 18-20% type of growth and some of these companies have diversified business models. They have also invested heavily into expansion. Our number one pick over there will be Apollo Hospitals. It is a largecap name and has not really gone up too much.

    Apart from that, some of the other names like Max Health and to some extent even Fortis should do well. The space is looking to grow at about 18-20%.

    What are your thoughts on Zee Entertainment? Yesterday, you had that block deal that took place with a number of buyers and Invesco selling out, the shareholder approval coming in for the Sony merger. What is your view on how the stock price has reacted to the news?
    Overall, a very positive view on Zee. I think majority of the merger related hurdles are clear, the shareholder approval or regulatory approvals and as we see a lot of synergies come through in the overall revenue pipeline over the next two years, that will be really good.

    We must understand that OTT is contributing extremely little – about 7-8% of the revenue. I do not think the market is giving any valuation to that. Given that this will be a top media play in the country with the majority of the regulatory hurdles out of the way. After selling 5%, Invesco continues to hold 10% but for the next six months there is going to be a sort of lock in and we would not see any incremental supply come through. That definitely makes it one of the preferred picks in the media space.

    What is the outlook on Nykaa because that stock was punished by investors and some of the analysts are of the view that their investment in differentiated value propositions will impact the margins. There is also severe competition in the fashion and beauty personal care products category.
    Some of these hyped IPO plays have been going through a rerating process and when we look at the numbers, compared to the market cap and the valuation that they are getting, they are still not justifying the current valuations. I think we should just let them stabilise and see what kind of performance any of these new listed companies are valued on and basis that only we should relook at investing into them.

    We have a plethora of opportunities across the listed space – be it banking, discretionary consumption so and so forth. We are not in any hurry to just buy into some of these names because they have corrected big time.

    What is the expectation from ITC?
    For ITC, we are looking at about 19% kind of growth in the EBITDA and their non-cigarette business also will continue to do well – be it FMCG, paperboards and hotel business. In the cigarette business also, we are looking at a steady state kind of growth and this is one stock which has surprised everyone in the last one year. It is one of the best performing Nifty stocks and we continue to have a positive bias there.

    Still bullish on Praj, how sustainable really is the ethanol story? Can one buy into names like Praj or maybe other sugar companies?
    Absolutely. The way the entire ecosystem is getting built around ethanol, I do think that there are very few companies which will have the technology to provide some sort of growth visibility for a number of companies which are trying to get into this space.

    I do think that for the next three years. both globally as well as in India, we will see much better re-rating for these kind of companies. The blending norms have been put in place and the way the energy issues are being faced by many countries, most of the government would really want to encourage this. Praj would definitely be one of the companies that we will be positive on.



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    (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
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