Bullish on cement, infra and NBFCs : Sandeep Raina, Edelweiss Broking

In a chat with ET Now, Sandeep Raina, Deputy Vice President, Edelweiss Broking, says in cement, South Indian cement companies are preferred because that is where the growth will be seen. Edited excerpts



ET Now: Do have any thoughts or any coverage on the cement names? We are just talking about cement and how those stocks are doing very well even in a subdued market today and if so, are you preferring the slightly expensive largecaps or you are going ahead with the slightly less expensive midcaps?

Sandeep Raina: I think we have spoken earlier also that we like the cement space and the reason is very simple. It is a function of V into P, that is volume into price. Now if you just have, if you would have seen the results of UltraTech and also the commentary, they are very bullish and they are talking about 7 per cent growth which actually is a very good growth and lot of companies will actually have volume growth of 8-10 per cent. Now in that also, there are pockets like UltraTech on the largecap side, Dalmia Bharat on the midcap side with a Rs 8000 crore market cap and Sagar from south, which again has a Rs 1000-2000 crore market cap. In fact, in cement, South Indian cement companies are preferred because that is where the growth will be seen. So cement as a pack should do well and these are two-three stocks which I have talked about and we are very bullish on them.

ET Now: Did you guys have a coverage on some of the recent IPOs? Any thoughts on L&T Infotech, the stock that listed today?

Sandeep Raina: So far we are not very bullish on L&T Infotech because it is just an IT company which is doing normal business . So there is nothing different about it. this company is doing or a special mode that this company has so we do not have per se special liking for this company.

ET Now: PNC Infra is a new one. What is the story here? Why should somebody invest in PNC Infra?

Sandeep Raina: PNC Infra is actually in the road sector. We are very, very bullish on the entire road sector. The reason is very simple. The kind of investment that the government is trying to put in to enable laying down 7500 km of road next year is very encouraging. It is a 60 per cent growth over last year. Now as for the companies that will benefit, there are a number of companies which would be part of EPC but few of them will only make money because of two-three areas on their balance sheets are strong,. Plus the execution is very strong. Then of course they know how to do their business. So PNC is one part of it which is a part of UP state and they are doing aggressively bidding and also they are doing winning lot of projects and also completing most of the projects on time.

With the UP election coming closer, a lot of impetus is actually coming from the state. PNC has an upper hand and at this price I think it is a story which can be there for next two-three years very easily.

ET Now: What is your view on KNR Constructions? You are maintaining a buy there with a target of Rs 710?

Sandeep Raina: The story is very similar. You know the road sector will grow and he is one of the again efficient play like PNC Infra. So the PNC Infra is in the northern part of the country and this guys is into southern part of the country. Again a very-very efficient on the balance sheet side and if I just take the core earnings which is at 20% ROE which is very-very strong and again the BOT 4 project what they have, two are already secured and two are running at full this thing. So overall a good space and it is available too at 12-13 FY18 again the valuation comfort is there. So it is a good stock which will keep on moving at 15-18-20% CAGR for us.
ET Now: What are your thoughts on NBFCs by and large?
Sandeep Raina: NBFCs by and large are looking very interesting despite such a long run. So a company like a Bajaj Finance or a Chola or a CanFin Homes, Ujjivan, are all looking very interesting because in NBFCs you have moats and all those moats can be seen in all these companies. I think they will keep on doing very well going forward also.