The Economic Times daily newspaper is available online now.

    Why Daljeet Singh Kohli continues to put faith in Gland Pharma and Divi’s Lab

    Synopsis

    “Gland Pharma which after the results, showed 15% decline in one single day. But I think that was more to do with some sentiments on Chinese promoters or something of that kind. Nobody knows the actual reason. In fact, the company has shown a quarter-on-quarter good recovery of almost 20%. ”

    Daljeet Singh Kohli bought into Alembic and Gland Pharma. Here’s why?ETMarkets.com
    “Divi’s is the third largecap which is already there in our portfolio. Right now, it’s draining a lot but again we are maintaining our positive view and faith in the company. The results are an aberration. There is a problem of optical irrationality also because there are a lot of things to do with the base,” says Daljeet Singh Kohli, CIO, Stockaxis.com


    The pharma sector has come out with a very mixed set of numbers. Injectables have not done well, some companies with specialty portfolios have done very well and some in generics have really taken a knock. What is the key takeaway from pharma numbers?
    It was expected that this quarter would be a bad quarter for most of the companies because of the inventory, for high cost raw material. Pricing pressure has not eased at all. Obviously there was twin pressure – the top line yields were not getting their realisation and we are already saddled with a high cost inventory. So this was very much expected.

    Unlock Leadership Excellence with a Range of CXO Courses

    Offering CollegeCourseWebsite
    IIM LucknowIIML Chief Executive Officer ProgrammeVisit
    Indian School of BusinessISB Chief Technology OfficerVisit
    IIM KozhikodeIIMK Chief Product Officer ProgrammeVisit
    Most of the companies have delivered in line with that expectation. There is a severe pressure on margins for almost all of them. But our understanding or the channel checks and our analysis shows that this was probably one of the worst quarters and from here onwards, we will see good recovery, one where channel destocking has happened, inventory problems are slowly and steadily getting away and from the next quarter onwards, we should not see that kind of a problem.

    On the pricing front, a lot of consolidation has happened and probably we will see stabilisation of their style or working towards speciality, complex generics kind of products. There is a lot of change happening. We have kept pharma as a sector on watch list in the last month. In the October monthly strategy note, we had mentioned that probably pharma will come into reckoning in the next one or two quarters and I think that is going in that direction. So we are positioned accordingly.

    We already have two stocks there; one has been an accident, a severe blow, Gland Pharma which after the results, showed 15% decline in one single day. But I think that was more to do with some sentiments on Chinese promoters or something of that kind. Nobody knows the actual reason. In fact, the company has shown a quarter-on-quarter good recovery of almost 20%. So, there was no reason for that kind of a selloff.

    We are still maintaining it and Gland Pharma is still a part of our portfolio. Alembic Pharma is the other one. So, there was this major concern about when their new facility will get through the FDA approval and that has happened now. They have already started getting three, four approvals from that facility and that the Rs 1,800 crore capex which the company has done in the last three, four years will start yielding result in the next two years when we will probably see benefits of that capex coming in. That is the reason we are holding Alembic Pharma.

    Divi’s is the third largecap which is already there in our portfolio. Right now, it’s draining a lot but again we are maintaining our positive view and faith in the company. The results are an aberration. There is a problem of optical irrationality also because there are a lot of things to do with the base. Some quarter there is Covid, some quarter no Covid and all those factors are creating this illusion about growth going down. I do not think one should be very apprehensive about the future of these kinds of companies which have a very strong moat. In the next one or two quarters, maybe this pain will go away.

    Of late, these companies have been in the spotlight and we are seeing clear implications of the numbers playing out on NMDC. Citi said that the domestic iron ore prices remain a concern. Do you see this as a huge overhang?
    We have a negative view on all the metals; in between, these rallies will keep coming in. Right now, there is some talk about China opening up and the Chinese government supporting their domestic economy by way of some financing to real estate etc. That will create some demand for all these metal companies.

    There is some spurt in these metal prices but fundamentally, I think that the rally is over far behind I think since last one year we are not having a positive view on metals, in between these trading bumps will keep coming in. If somebody is a trader one can bet but if one wants to put it in a portfolio I think we will stay away from all of these stocks.

    What do you make of the banking set of numbers? For years, private banks like HDFC, ICICI, Axis have been doing well but what do you make of PSU banks doing well or some of the second tier banks or NBFCs which people had forgotten in the last four-five years?
    This quarter, they have all shown very good set of numbers, asset quality issues are clearly behind now, most of the banks have done lot of cleaning up. For the last seven-eight years, they have been doing only this. Right now, this has become a kind of 100% consensus call that public sector banks will perform because all cleaning is done.

    In our portfolios,SBI is the only public sector bank because it behaves more like a private bank than government bank. Others we have avoided although they have given good returns but we have still avoided – two reasons. One, we believe there is a kind of little disbelief in their track record. In the last many years, in one or two quarters, they do very good and then suddenly you see a lot of negative surprises coming in.

    Second, after seven-eight years of cleaning up, these guys are ready to grow and for growth, they will need capital which will mean that they will have to come to the market again because now the government will not put money, government has already supported them in the bad times.

    Probably they will come to the market and do more equity dilution which will again not be a very conducive thing for minority shareholders. So I think we are as of now staying out of these public sector banks. SBI is there in our portfolio with HDFC, ICICI Bank and Kotak all three of them are there in our portfolios.

    Your take on some of these retail stocks as well as the FMCG space as well? In the last four consecutive trading sessions, FMCG has been under pressure and this is largely coming in from the staple basket, the likes of Nestle, HUL, etc, have been lower, ITC too has been languishing just around Rs 320. What is your take of where these stocks are headed?
    So in that space we prefer two sub-segments – QSR space where we have Jubilant Food in our portfolios and Devyani also. We have given it for Diwali picks. We like these two things because there is a lot of change in eating habits and there are trigger points for these two stocks to play because this is the first time we are having two world cups together – one cricket world cup has just happened and then we have a soccer in the next one-and-a-half months.

    When these kind of sports events are there, usually we see a lot of activity in these stocks and they are trying to perform in line so these are the two and on the other two things we have is Manyavar and Arvind Fashions, again Arvind Fashions was a Diwali pick. Manyavar was an earlier pick for quite some time so these two again on the basis of the pent-up demand as well as the aspirational expenses which people are looking at after two years as they were not allowed to celebrate occasions. Manyavar is a clear winner from that side,

    Titan is the other one. Another stock within this space is Varun Beverages which we like because of its takeover of other regions which were not there earlier with the company. That means now the seasonality part will be reduced to a large extent. The company has been showing a very strong set of numbers in terms of growth for the last two quarters. Varun Beverages has done a very strong set of numbers.

    So these are the four-five stocks that we are keeping in our portfolio.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)




    (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