ET Now In a chat with ET Now, Mayuresh Joshi of Angel Broking shares his views on some stocks. Excerpts:
ET Now: What is the call on Havells? The numbers maybe marginally below estimates, but do you think it is a pedigree stock?
Mayuresh Joshi: After the price movement in Havells, the stock is richly valued at the current juncture. Clearly, an increase in tax rate was evident from the balance sheet with most units going off in the next couple of years and this will account for lower margins going forward. It might be set off with the MAT credit that Havells has on its balance sheet. The bottom line is that the impact might not be that significant as the margin impact might be for the company.
But having said that, from within this group itself, we at this current juncture like Crompton Greaves, where we believe that the restructuring story should continue. The demerger of the business augurs well for the stock in terms of value and various components of its business should start performing reasonably better over the next few quarters. At this current juncture, Havells looks richly valued. In Crompton, there is still some steam left to reach at Rs 220-230 odd levels.
ET Now: JP Group inking a pact with Reliance Power for around Rs 12,000 crore. What have you made and any details that you would like to point out?
Mayuresh Joshi: After this deal, JP Power and JP Associates are reacting very positively because on a consolidated basis, at least for JP Associates, the net debt will come down significantly. Again, the valuations that JP Power was driving from the TAQA deal were close to Rs 9869 odd crore and this is a much better deal than that they have struck with Reliance Power. In that sense itself, it should be an incremental positive for the stocks.
How it will add on to the cash flows is a matter of time because the group is still struggling with the overall interest liability which has almost doubled in the last year from Rs 3000 odd crore to Rs 6000 crore. They will marginally be able to get down the debt with this deal, but they need more deals to happen - the land parcel sales on the JP infrastructure side and more assets sales to basically keep churning their book.
However, in that sense, the cash flows will be something which is a difficult thing for JP Associates to monitor and monetise. In that sense itself the stocks might react sentimentally at the current juncture, but over a longer period of time it will be results and the cash flows from core operations which will drive earnings, which we do not believe is there at the current juncture.
ET Now: Take us through what is it that you are expecting from HUL this quarter?
Mayuresh Joshi: Clearly a strong set of numbers should come through. Our own expectation from HUL is a 4.5% volume growth. The revenue growth should be anywhere in between 10 and 11%. This also has last year’s base effect because of the transportation strike in Q4 of last year which had a lot of inventory built up. The PP segment will be something to be watched out for. The ad spends is something to be watched out for with competitive intensity increasing specifically in the oral segment.
In that sense itself, HUL numbers might be more or less in line with what the street is estimating. From a valuations perspective, the stock is trading close to 31-32 odd times, which we believe is quite expensive within the FMCG basket. We maintain a neutral view, though the results will be a little bit better than what the street is expecting.
ET Now: What do you make of this rejig of gas policy? Is it a win-win for IGL?
Mayuresh Joshi: Going by the news, it could be incrementally positive for city gas distribution companies. However, IGL has its own issues with the order of PNGRB, which will be a big overhang for the stock. However, if city gas distribution companies are getting a priority in gas allocation going forward, then it should incrementally be positive, if you take aside the overhang that IGL has on the stock.
Other stocks to be watched out for can be Gujarat Gas, which can incrementally be benefitted from the order. However, one really needs to read the order through carefully before coming at a conclusive decision on what stocks can incrementally benefit from this.
ET Now: What is the call on Havells? The numbers maybe marginally below estimates, but do you think it is a pedigree stock?
Mayuresh Joshi: After the price movement in Havells, the stock is richly valued at the current juncture. Clearly, an increase in tax rate was evident from the balance sheet with most units going off in the next couple of years and this will account for lower margins going forward. It might be set off with the MAT credit that Havells has on its balance sheet. The bottom line is that the impact might not be that significant as the margin impact might be for the company.
But having said that, from within this group itself, we at this current juncture like Crompton Greaves, where we believe that the restructuring story should continue. The demerger of the business augurs well for the stock in terms of value and various components of its business should start performing reasonably better over the next few quarters. At this current juncture, Havells looks richly valued. In Crompton, there is still some steam left to reach at Rs 220-230 odd levels.
ET Now: JP Group inking a pact with Reliance Power for around Rs 12,000 crore. What have you made and any details that you would like to point out?
Mayuresh Joshi: After this deal, JP Power and JP Associates are reacting very positively because on a consolidated basis, at least for JP Associates, the net debt will come down significantly. Again, the valuations that JP Power was driving from the TAQA deal were close to Rs 9869 odd crore and this is a much better deal than that they have struck with Reliance Power. In that sense itself, it should be an incremental positive for the stocks.
How it will add on to the cash flows is a matter of time because the group is still struggling with the overall interest liability which has almost doubled in the last year from Rs 3000 odd crore to Rs 6000 crore. They will marginally be able to get down the debt with this deal, but they need more deals to happen - the land parcel sales on the JP infrastructure side and more assets sales to basically keep churning their book.
However, in that sense, the cash flows will be something which is a difficult thing for JP Associates to monitor and monetise. In that sense itself the stocks might react sentimentally at the current juncture, but over a longer period of time it will be results and the cash flows from core operations which will drive earnings, which we do not believe is there at the current juncture.
ET Now: Take us through what is it that you are expecting from HUL this quarter?
Mayuresh Joshi: Clearly a strong set of numbers should come through. Our own expectation from HUL is a 4.5% volume growth. The revenue growth should be anywhere in between 10 and 11%. This also has last year’s base effect because of the transportation strike in Q4 of last year which had a lot of inventory built up. The PP segment will be something to be watched out for. The ad spends is something to be watched out for with competitive intensity increasing specifically in the oral segment.
In that sense itself, HUL numbers might be more or less in line with what the street is estimating. From a valuations perspective, the stock is trading close to 31-32 odd times, which we believe is quite expensive within the FMCG basket. We maintain a neutral view, though the results will be a little bit better than what the street is expecting.
ET Now: What do you make of this rejig of gas policy? Is it a win-win for IGL?
Mayuresh Joshi: Going by the news, it could be incrementally positive for city gas distribution companies. However, IGL has its own issues with the order of PNGRB, which will be a big overhang for the stock. However, if city gas distribution companies are getting a priority in gas allocation going forward, then it should incrementally be positive, if you take aside the overhang that IGL has on the stock.
Other stocks to be watched out for can be Gujarat Gas, which can incrementally be benefitted from the order. However, one really needs to read the order through carefully before coming at a conclusive decision on what stocks can incrementally benefit from this.
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