Give a breakout or even a breakdown for that matter because they seem to be shrugging off all news.
Hemang Jani: It is not a bad thing that you throw a bit of a pause or a time correction and the basic structure of our markets, the earnings picture, on the regulatory side we have lots of positive developments. The only issue at this point of time is that you have a bit of uncertainty because of the geopolitics, the crude prices going up a bit which eventually should cool off as we see more stability on the geopolitical front. So, not too worried about this pause as such. Flow’s picture and the earnings trajectory from here on for next two-three quarters is positive and to my mind that would be a big trigger for the markets.
But we are seeing a lot of these defensives now making a comeback. It has been doing well. Select FMCG counters are making a comeback. So, give us some sense that how do you see the other sectors participating and what is your take on FMCG and it as a pack.
Hemang Jani: The market would always have this phase where you see rotation. So at one point the banking was showing the leadership and let us say last about three to four months we had the entire pack of NBFCs doing well, but there is a bit of a pause post this RBI policy. So, our sense is that it as a pack people are turning positive because A) the earnings picture this quarter will better on the US front, we think that things would look better and discretionary spend will see a bit more uptake.
So, it definitely we are positive and we think that from a near-term perspective some pockets could do exceptionally well. FMCG, I am not a big fan of that space. You may see a bit of a move here and there bases either monsoon progress or some companies delivering reasonable numbers, but high valuations and the fact that there is nothing exciting about the growth, so we are not too excited by that. But cement be one space where we continue to be positive because we think that next one or two years we will see a significant up move in the margins trajectory as well as the earnings.
Let us talk stocks and I want to talk about Trent. The company at their analyst day has set a very aspirational target of 25% long-term revenue growth. We have seen the way the stock has languished from those lofty levels that it was quoting at about six months back. From there, there has been a very-very steep correction. But do you think that they can actually head to that 25% revenue growth and what will move the stock price from here?
Hemang Jani: The fact is that in the entire retail/discretionary spending, this is by far the leader and even when the overall consumer environment was not so good, this company could deliver either in the form of Zudio and even the other formats they have continued to deliver. So, market does not mind paying higher valuations for somebody who comes up with innovative concepts and is finally able to execute well.
So, I do think that this company can definitely surprise you on the growth side with all these newer launches, etc. Not too much worried about valuations. It is a high beta stock. Sometimes on a bad day, it may correct 5%, 7%, 10%. But overall, extremely positive view on Trent.
Within the retail space, we are seeing a renewed investor interest coming in because just yesterday we also saw a stock like DMart surging anywhere between 3% to 4% in a weak market and that was after their new expansion in Uttar Pradesh. Give us some sense that how do you see the stocks going ahead? What are the factors at play and at this point in time are the valuations comforting?
Hemang Jani: So, DMart has started doing well in the last two months after almost underperformance for one, one-and-a-half years. But my feel is that even if they introduce certain categories and formats, the valuations continues to be on a much higher level for a growth which is 16-18%.
You have quick commerce which can also disrupt some of these guys. So, not a big fan for buying something which is very expensive when it comes to DMart. But coming to the retail plays per se, we have a very strong positive bias.
Eternal and Swiggy because we think that the competitive intensity is coming down and we will see better positive surprise on the margins and even on the gross volume front for these two companies.
Do you think post all those issues on IndusInd Bank, you think it is all in the price now, the stock has corrected enough and does it become a buy at all?
Hemang Jani: It is a bit difficult to say that because while most of the negatives are known and priced in, it remains to be seen as to who is appointed as a CEO, whether we have overall in terms of the new team being put in place and most importantly what kind of growth are we really looking at.
And within banking, it is not as if that IndusInd is available very cheap, but you have many other banks in the tier II, tier III categories which are available at a similar without much of an uncertainty.
So, I may be a buyer from a tactical point of view because of the kind of underperformance that IndusInd had, but certainly not very comfortable buying this for a longer term.
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