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    Dipan Mehta on why Page Industries is falling & what could be the multibaggers in next 7-8 years

    Synopsis

    Elixir Equities Director, Dipan Mehta, argues that new age companies such as Zomato, Policy Bazaar, Nykaa, and Paytm are stocks of the decade of the 2030s and could be huge multibaggers over the next 5-10 years. However, these companies are still in their investment phase, which reflects in their P&L, although they are making strong efforts to get into EBITDA positive. Regarding concerns about Page's decline, Mehta suggests that a demand slump due to higher inflation and uncertainty around weather patterns may have impacted Page industries.

    Dipan MehtaNEW-1200ETMarkets.com
    Dipan Mehta, Director, Elixir Equities, says “we are approaching the new age companies just as you buy options and with a very long term view like 5-10 years or so. The likes of Zomato, Policy Bazaar, Nykaa, Paytm are stocks of the decade of the 2030s. They could be huge multibaggers over the next seven- eight years or so. But they have this investment phase which they are in, which is reflected in their P&L.”

    What went wrong with Page and should you be buying the decline which I am sure is going to happen on the stock today?
    Page has kind of bowled us all over and one needs to dig a bit deeper as to what exactly has gone wrong. But I suspect that what we saw with a lot of other retail players, especially those which are growing faster than the rural areas, there has been a bit of a demand slump because of higher inflation and uncertainty around weather patterns and that may have impacted Page industries. But we need to go a bit deeper and see whether this is transient or there are some structural changes taking place. So many questions for the management to answer let us just have a better view on it once we are more informed.

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    What about Hero MotoCorp? 350 is the engine capacity of RE. Hero MotoCorp is going to add 90 more and make it 440. What do you think it means for the stock?
    There have been many challenges for Eicher Motors. Not now, I think in the last three to five years since we have seen the success of Royal Enfield, many competitors have come but they have not been able to make a significant dent. Eicher is miles ahead when it comes to competition in terms of launching new products.

    What they are selling is a complete lifestyle and they appeal to a certain class of consumers who are adventurous in nature and that kind of a brand and that kind of aspiration can never be done by Hero MotoCorp or Bajaj. It is like any tier two-tier three OEM trying to sell a luxury car that just does not work. So I am not that perturbed about any challenge coming from Hero MotoCorp or even Bajaj Triumph tie up.

    The real threat for Eicher is going to be from the electric vehicles because their main consumers also are quite eco-friendly and they care about the environment. So unless Eicher has a significant offering in the electric vehicle side maybe two-three years down the line and that is when they start to face all the problems. But for the time being, I am not too perturbed. With the way they have expanded the distribution and the export opportunity available for Eicher, they should be able to sustain mid-teens type of growth for at least three to five years or so.

    Looking at the list of stocks which are at a 52 week high and despite the fact that consumer stocks are expensive, consumer staples are expensive, the new high on the Nifty are three names, Bajaj Auto Company, ITC which is FMCG/staples and Britannia which is FMCG/staples. Markets are telling us a different story.
    Yes, you are right. The index is a composition of 50 stocks and sometimes the laggards also will have their day in the sun and they will take the index higher but that does not mean that those are the best stocks to buy. The likes of ITC have been huge underperformers for many years and now they are trying to play catch up over there.

    The same is true for Bajaj Auto as well and Britannia. But really the bulk of the say last 2000 point gain in the Nifty has come from the banks. It has come from technology as well. It has come from Reliance as well. So just because the new highs on the or rather the recent change in the Nifty on the positive side is driven by these three companies does not necessarily make them the best buyers at this point of time. All of these three companies have got issues in terms of growth rates going forward.

    ITC remains a tobacco company where growth rates will be in the low single digit. Bajaj Auto is facing tremendous threat from EVs. We saw today the news about Ola Electric planning a billion dollar type of IPO to drive electric two-wheeler sales and that is going to be a huge challenger for Bajaj. Britannia had two-three soft quarters but last December quarter’s numbers were exceptionally good and that is certainly one stock that one should look out for.

    It seems to be one of the best plays in the FMCG pack. Just because the stocks have reached new highs does not necessarily make them growth drivers or index drivers going forward. We need to have a more balanced approach.

    Of course the all-time lows in Zomato are a miss but now that you have more confidence in what the company intends to do, the deliverable capacity and capability, would you be a buyer here?
    First a disclosure that we have already invested in Zomato. It is not that we are sitting on huge profits. More and more I am seeing the way these new age platform companies are shaping up. Certainly, there is no disappointment on the growth front. They are following through with a plan, their growth rates have been good across the board. They are making very strong efforts to get into EBITDA positive and then start to declare very high cash profits as well. But that still seems to be a few quarters away.

    We are approaching these companies just as you buy options and with a very long term view like 5-10 years or so. The likes of Zomato, Policy Bazaar, Nykaa, Paytm are stocks of the decade of the 2030s. They could be huge multibaggers over the next seven- eight years or so. But they have this investment phase which they are in, which is reflected in their P&L.

    You will have trading rallies in them from time to time as there is positive news flow. But for them to deliver sustained returns, significant outperformance over their peer group or other midcap stocks that may take a while. But on the whole, the performance and the environment and the overall build-up of the stock, especially Zomato, looks quite good. It is a duopoly and certainly at some point of time, they will have the benefit of that.

    We have had a good comeback in the market. No one should complain. We are not at bombed out levels. Given that we have had a 7-8% rally on the Nifty, about 10% rally on the Bank Nifty from the recent low, is it prudent to take 10-15% profits off the table?
    If you ask me, this is just the beginning. After all this inflation interest rate damage which has done to the equity markets globally, the last mini crisis is this debt ceiling in the US. Once we are over and done with, we see very good times for Indian equities. The most heartening factor is FII flows turning positive.

    The earning season has been pretty decent and there is nothing in the earning season to suggest that fundamentals have been shaken or growth rates have been impacted. We saw today's GDP print also and that is also quite decent, slightly higher than what economists were expecting. The fly in the ointment of course, could be in the monsoons but considering that we have had four or five good monsoons, it may not have such a negative impact on our economy.

    But on the whole, we are revving up for good times in the next few months or so. And of course, I could be wrong over here. But I do not think this is the time to book profits. In fact, this is the time to look at increasing exposure to equity at every correction or even around these levels also.



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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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