On our buy list, we have Cadila because of the number of approvals that they are getting from Moraiya facility and especially the launch of Lialda which they did in the last quarter. So quarter two and quarter three numbers will be very good for Cadila. But to say that conviction is coming back, the worst is over for pharma pack and we should start buying all the pharma stocks, is not the right way to go about it. Whatever movement you saw today was because of a bounce-back and maybe the market is realising that the stocks prices have come off sharply. So there is some potential there.
The fundamentals have not changed in the last five-seven days. So there is no reason for these stocks to move up so fast. Coming to valuation attraction, the problem is that there is no visibility on the earnings itself. Every day we are seeing new competition coming in, problems from FDA coming in.
There is lot more uncertainty still there and the worst part is that this uncertainty is moving not only from just US market, it is moving to other geographies. India was a good, at least safe place but because of GST and the government’s various new initiatives on providing health to poor people at affordable rates, capping of prices etc, there is problem for the pharma sector on domestic side as well.
There are many reasons as of now to still remain negative on the pharma pack. These kind of bounce-backs will keep coming in but one should use them as opportunity to get out.
The day when this news broke out, the stock went down by 10%. At that time we used that opportunity to buy some more. It has been on our buy list for quite some time but earlier the reason for buying has always been that Infy has been doing many things on the cloud part and on the new age requirements of IT. For the last two-three years especially from Sikka’s time, they have been developing products which will be suiting the needs of the new age requirement It will not be no longer be the mere body shopping company it used to be earlier. That thesis remains whether Sikka is there or not. I do not think that with the exit of the CEO, all the projects of the company will stop. We thought that it is a good opportunity to actually accumulate plus there is an arbitrage opportunity when this buyback thing comes up. Whenever they announce that date and third thing is that our conviction is that ultimately being a strong company and being a bellwether for so long time, they will get a CEO.
It is not that if we draw an analogy with Tata Motors and Tata Group companies, we have seen this kind of thing happening. One should have that conviction and we have utilised this as these dips as buying opportunity. We have added on that.
On public sector banks. our view remains negative. I think we believe that it will take a very long time even if they start this process of consolidation it is not going to be easy, it will take-- one there are procedural requirements which will themselves take a very long time. Second, there are cultural issues which will come up once you mix these two banks. Third, what is the aim to be achieved which itself is not clear I think.
All this talk that is going on purely because the government needs to be showing that they are doing something but nobody knows that what they actually aim to achieve out of this.
So merging good with the bad is obviously a foolish step. Merging bad with a bad will not give you anything. What is the reason to do all this I do not understand that. I think public sector because of this reason when most of these banks are moving it is the time to move out of them or be very cautious of them. For a very long time we have had a negative view on these banks. Only SBI we have had on our buy list I think that will still continue.
Slowly and steadily, opportunities are emerging in the infrastructure space although people believe that infrastructure space because it is lying low and that it has not participated in the entire rally, will give a very big return. I do not think that can happen because these companies have their bits of problems and that will take a very long time to resolve.
But there are opportunities which are coming out of these companies. So, one should be very cautious but one needs to do very deep work on them.
As regards Dilip Buildcon, we had seen this stock at around Rs 300 but then it moved very sharply and did not give us the opportunity really to initiate the coverage in a formal manner.
They have been known for their execution capabilities and this Rs 1600-crore deal is again a very big positive because it will release the debt impact as well as it will free them the resources for taking new orders. So, both ways it is a good benefit for Dilip Buildcon. We have a positive bias on that because we do not cover, so I cannot give you the target price or the numbers there.
Regarding GMR Infra, we are keeping it under our radar, watching it, they have done some bit of restructuring, bit of selling of certain assets and they are also now talking about REITs, InvITs. But the problem for them is very, very large. With Dilip Buildcon the issue is different. They are doing it out of their running business which is doing properly, which is doing very well. With GMR, it is a compulsion to do because they have problems and they need to get the money so that they can rectify their past problems
Since the last one and a half years we have had a positive view on Reliance with a buy rating. Our target currently is Rs1650 which is likely to be moved upwards. Our call is not on Jio phone. I do not think that is going to be a game changer or anything on the numbers side, it will be a sentiment positive or whatever you call it. Our call has been right from one and a half years on the basis of the expansion plans which yesterday they have also quantified. Somehow we had also built in similar kind of numbers coming in from the multi fuel usages, of gas cracker plant, expansion of petrochemicals all those kind of things so they will all play out in the second half of FY18 and then FY19.
And we had built in that in our numbers. Jjust to give you an example, we had put FY17 EPS at Rs 85, we had something like Rs 105 for FY18 and then Rs 125 for FY19. That builds in this kind of expansion coming from the margin as well as the efficiencies and increase in the capacities.
Reliance is in for a good time for the next few years so if anybody thinks that they have missed the bus I think they will miss further more so it is better that they can add as much as they can and as soon as they can. On any dip, one should be adding Reliance as the target prices will keep rolling upwards so we do not have to worry about that target price.
It is very tempting to go with this view that now you should look at Airtel. The stock has passed almost two-three years of consolidation phase and there is a big positive coming from this interministerial group where they are talking about some benefits on spectrum timing as well as payments timing.
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