Prefer IndusInd and HDFC Bank to Yes Bank: Pankaj Pandey, ICICIdirect.com

In a chat with ET Now, Pankaj Pandey, HoR, ICICIdirect.com, says the Yes Bank franchisee is largely on the corporate side or it is more likely kind of a wholesale bank wherein the spread may not be that kind. Edited excerpts

ET Now: Yesterday, Nifty fell about 140 points and it was a 200 point reversal from the day’s high. What led to yesterday’s selling and do you think retail investors are now panicking?

Pankaj Pandey: If you look at the global scenario, the central banks are experimenting too much. So if we look at the case of Japan, they have been coming up or they have been pumping money into the economy to a great extent without any incremental GDP growth rate in the past four-five years. That is eventually leading to sort of decline or depreciation of their currency and now people are looking at negative interest rates and I think quite encouraged to sort of adopt because it helps them in maintaining their fiscal deficit. I think global-led volatility will keep coming to markets and will keep impacting us. But I think on the domestic side, we are getting a decent sense of numbers and I think with better monsoon we would expect that the Indian markets would be far more resilient compared to overall global markets. But given that the rally we have seen of about 12-13 odd per cent, it is quite possible that the markets would take a breather at current levels before inching up.

ET Now: It is in the EPC space. It is a government company. Completely different model. They work on a cost plus basis. But at Rs 1000 or just closer to Rs 1000, is there money to be made in NBCC?

Pankaj Pandey: If you look at this stock, it has been consolidating at current levels for quite some time and what we have seen fundamentally is that the company has won orders worth to the tune of about Rs 20,000 odd crore in the last one year and their total order book is about Rs 35,000 odd crore. In terms of order book to bill ratio, they are one of the highest at about 7.3 times trailing 12-month revenues. What we also expect is that this company would be a big beneficiary of the government cpaex like it has panned out in the last one year by tapping opportunities in terms of redevelopment of old colonies plus redevelopment of railway stations and other stuff. In addition to that, if you look at it from a business model perspective, the bulk of the order is in PMC division which has a negative working capital structure. So from that perspective, this company within the overall EPC space is very well poised and at this point of time, we have a target price of Rs 1100 but we expect that the company will do far more better than the target prices which has been given by us given the overall improvement in the government capex which we are seeing at this point in time.

ET Now: Between Yes Bank and IndusInd Bank, both the stocks which are exhibiting leadership patterns which is a better stock to buy and why?

Pankaj Pandey: So largely if you look within the private banking space there is a flight towards safety or comfort which people are looking at given the challenges which a lot of corporate private sector banks are facing or the PSU banks are facing. So from that perspective, I think within the private banking space HDFC Bank and IndusInd Bank would stand out. I think I would not be relatively so positive on Yes Bank given that the franchisee is largely on the corporate side or it is more likely kind of a wholesale bank wherein the spread may not be that kind-- or the durability of the spreads may not be that much high so which is why the preference would be towards IndusInd and HDFC.

ET Now: Interesting to see that you have got two of the related media seems a PVR as well as a Jagran Prakashan, tell us what makes you bullish on these two names.

Pankaj Pandey: So Jagran if you look at, we have our target price of Rs 193 and this company is a market leader in a market like Uttar Pradesh in the print media space and it is number two or number three in other markets like Bihar, Jharkhand or Uttrakhand. The ad revenue growths for the company has been far more compared with the rest of the industry. This company has grown their ad revenues by 14 per cent odd compared to overall industry growth rate of about 9 per cent odd. Now what we are expecting is that the company would show 11 per cent odd ad revenue growth. Besides that, we also expect the impending elections in UP to trigger some better ad revenue growth going forward. In addition to that, the radio business is also doing quite well. So we expect a margin expansion to sort of pan out in both radio as well as print media business and that should lead to good run up in the stock. The stock has been fairly stable and has been part of our yearly pick as well.

ET Now: Do you track any of these names -- SQS, Can Fin or a Granules?

Pankaj Pandey:If you look at some of the names which you have mentioned, we do not track any of these companies but within NBFCs, we like Bajaj Finance. Bajaj Finserv is another stock which we like. In addition to that in some of the niche pharma players, we like Syngene wherein the company has come out with decent set of numbers and they are preponing their capex. So from that perspective, we like these kind of niche names.

ET Now: Your thoughts on FMCG per se, the kind of heightened competition and how it is slicing and dicing all across the segment and whether or not Britannia can actually hold itself within this sector?

Pankaj Pandey: Within the FMCG space, if you look at Dabur numbers, we were quite good and in terms of volume growth the company came out with volume growth of about seven odd per cent despite the fact that the full benefits of real fruit juice did not pan out in this particular quarter. In case of overall care category, we have seen double digit growth thanks to competition. So from that perspective and with the prospect that the monsoon is expected to be better, I think the entire FMCG space is entering into a sweet spot wherein it is quite possible that you could see decent double-digit growth also. In addition to that, if you look at this sector, it has not taken price hikes in the past one or two years. So that could also lead to some bump up. So from that perspective, I think FMCG as entire space can be looked far more constructively and positively.