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    Want to play the agri theme? Bet on these 4 stocks: Chakri Lokapriya

    Synopsis

    “Hotel companies will continue to do well. If they are put in two brackets – one is the mid income and above mid income which is where Mahindra Holidays, Thomas Cook fall into and then the luxury end of the segment which includes India Hotels, Chalet Hotels, Taj Hotels and the Marriotts of the world.”

    Chakri-LokpriyaAgencies
    “The companies which do not have much government intervention and control on prices, like PI Industries or Coromandal Fertilisers and even Navin Fluorine, are well placed because they have a balance between domestic agro, export agro as well as speciality chemicals, which is value-added agro. Amongst the smaller companies, Best Agro is also a good company,” says Chakri Lokapriya, CIO & MD, TCG AMC

    There is a lot of anticipation ahead of the festive season and some buzz around PLI as well that is keeping the textile stocks abuzz. Arvind Fashion, Trent, Go Fashion traded at significant volumes. Do you like anything from this space?
    All the names that you mentioned including Arvind Fashions, Aditya Birla Fashion (ABFRL) are looking good. ABFRL’s sales growth is going to be really strong – 17-18% going into next year. Its earnings growth is going to be well north of 35%-40% going into next year and if you look at the current inventory momentum for the company, very strong stocking up into the festive season. It trades at around 15-17 times and so it is not an expensive stock in terms of business momentum coming back into the company’s products.

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    Second is Arvind Fashion. It has lots of industry leaders in the higher end of the segment – Tommy Hilfiger and also some of its newer businesses like Sephora are doing really well. It is branching out into many cities and in Sephora they sell both in-house brands as well as market leading brands and are expanding their market share. There of course is a buzz that maybe Reliance might buy Sephora but that notwithstanding, Arvind is well positioned given the strength of its brand in the premium segment.

    From the entire cement pack, Dalmia Bharat and JK Lakshmi Cement were your top bets. What is your rationale there and how are you looking at the entire sector?

    We are still positive on these names and since we last spoke, JK Lakshmi is up about 25%. Wednesday’s weakness is partly on account of some amount of profit taking, some amount of nervousness or uncertainty over the ACC-Ambuja deal. But that is regarding the pledging of the shares of those companies and it is more an LBO they are going to finance versus the cash flows. That does not change the outlook for a JK Lakshmi or a Dalmia Bharat.

    These companies are in recovery, more volumes are growing, valuations are fairly intact and in fact, companies like JK Cement have expanded its capacity from 10 million tonnes to 14 mt. When you have these kinds of capacities already in place, it provides huge operating leverages for these companies which means that such a top line flow drags down to the bottom line supporting margins. We are still positive on the cement sector and these names.

    If somebody has missed out on the entire rally does the current level provide a good opportunity to get into the space or may be one should wait for some more correction?
    For instance JK Lakshmi has run up but JK Cement has not run up that much. Dalmia Bharat has not run up that much so I think picking amongst the cement stocks Dalmia Bharat looks better than JK Lakshmi but still the overall business momentum is positive.

    What is your take on the hotel sector? Historically, hotels fundamentally are not strong businesses in terms of the business model itself?
    Hotel companies will continue to do well. If they are put in two brackets – one is the mid income and above mid income which is where Mahindra Holidays, Thomas Cook fall into and then the luxury end of the segment which includes India Hotels, Chalet Hotels, Taj Hotels and the Marriotts of the world.

    What is happening in the luxury segment is that some amount of foreign travel for vacations is now getting cut because there are some visa processing delays in Europe as well as the US. That is translating into luxury domestic holidays from which Indian Hotels, Chalet Hotels benefit.

    Now with the booming IT sector as well as above mid and mid income looking to go out and loosen their purse strings, Thomas Cook which also runs Sterling Holidays, a very similar business to Mahindra Holidays will do well. After all the runup, valuations as well as operating margin expansion is on their side. So, these stocks will continue to do well.

    What is your take regarding the entire agro basket? The chemical and fertiliser stocks are quite excited on account of Europe plus one strategy as well. Is there anything that you like in the entire agri theme?

    The companies which do not have much government intervention and control on prices, like PI Industries or Coromandal Fertilisers and even Navin Fluorine, are well placed because they have a balance between domestic agro, export agro as well as speciality chemicals, which is value-added agro.

    Amongst the smaller companies, Best Agro is also a good company growing quite fast where there is no clear government control over the prices. These names are well positioned and their revenue is growing very fast and EPS is going north of 20%.



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    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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