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  • MODERATOR:

    Hello and welcome to the webchat with Mayuresh Joshi, Fund Manager (PMS), Angel Broking on all queries related to Analysis of India Inc's March quarter results



  • M

    MEHUL

    Sir is right time to buy LIC Housing Finance at Rs 450 for a span of 6-12 months?

    MAYURESH JOSHI

    GA Mehul...My belief is that NBFC as a space should continue delivering strong set of numbers over the next 4-6 quarters. Despite a challenging macro environment LICHF has so far maintained a decent asset quality. During the quarter, the GNPA ratio came down to 0.45% vs 0.58% in the sequential previous quarter, while the NNPA ratio came down to 0.22% vs 0.32% (in 3QFY2016). I expect LICHF to post a healthy loan book CAGR of 19% over FY2016-18E, which is likely to translate in an earnings CAGR of 21.0%, over the same period. The stock currently trades at 1.9x FY2018E ABV. The stock can do well over the next 12-18 months.


  • S

    SALIL

    Why is Kotak Mahindra Bank so heavily priced and still being heavily recommended by most of the analysts even though its GNPA levels are not that low and are quoting at 2.3%?

    MAYURESH JOSHI

    GA Salil...What has held out Kotak Mahindra Bank has been its strong advances/deposit growth with stable asset quality/managable credit costs which aided in the bank enjoying high NIM's/ROA;s. With the ING merger there are inherent integration issues which pulls up the credit costs, pulls down the proportion of high yielding retail assets, increases the pressure on asset quality both GNPA's and NPA's which has been seen in the past few quarters. the increase in GNPA level is because of the legacy issues of ING bank that it has taken over but the management believes that the same shall stabilize around the same numbers. Again the bank has always traded at higher valuations because of its superior asset quality which led to superlative return ratios which might get compressed a tad bit due to the merger.


  • D

    DEBARATI

    Hopes of good monsoon and pick-up of orders in the infrastructure pocket have boost the market sentiments. Therefore, what is your reading of the Nifty by the calendar year 2016? How do you see the largecaps playing out in the first quarter of FY2017?

    MAYURESH JOSHI

    GA Debarati....With reports suggesting that monsoons expecting to be better this year after two consecutive droughts the sentiments are highly skewed towards the sectors to be positively impacted if this scenario plays out. Infrastructure is largely demanded on how the capex cycle pans out and the government spending is expected to be extremely robust in the first half of this fiscal. the private capex has lagged and not picked up for apprehensions of order flows, margins, utilization levels remaining weak etc. However, the government emphasis on getting stuck projects on track and debottling the same shall have positive implications for the sector. Results might be soft for this quarter and the next two but a gradual recovery is expected by HYFY2017. so, large caps should start delivering by Q4FY17 and if everyting is on track FY18 might be far better.


  • S

    SHEETAL

    What is your yearend target for the Nifty Bank? ICICI Bank and Axis Bank have under-performed the banking space on asset quality woes. Which are your favourite picks in this pocket?

    MAYURESH JOSHI

    GA Sheetal.....ICICI and Axis Bank have been facing asset quality pressures due to their exposure on the Corporate/SME side and the consequent provisioning undertaken for asset quality recognition. The management commentaries on stress to continue leading to greater credit costs is well gestated going by the figures on probable asset quality stress given out. Retail oriented banks have done better and are expected to still deliver both in terms of NII growth, lesser asset quality stress and good addition on the non interest component as well. HDFC bank has given great set of numbers and I expect earnings growth in excess of 20% while Yes Bank/Indusind bank can be held on by investors as valuations for these two at this juncture appear rich.


  • J

    JIYA

    If you are asked to select a couple of stocks from the midcap space in the next week, what would be on your buy/sell list?

    MAYURESH JOSHI

    Good Afternoon Jiya,.....Voltas is looking like a reasonable long-term play. With improvement in the EMP business and the Room a/c division performing well, cash flows should sustain for the company along with its market leadership position entailing strong earnings/top-line and bottom-line growth going ahead. NBFC as a pocket is something I like going ahead as well...strong growth in retail advances with asset quality remaining stable and cost of funds coming down make it a strong compounding story with estimates of earnings growth in excess of 20% CAGR over the next couple of years. LIC housing Finance is something I shall prefer.


  • R

    RAKSHA

    What is your reading of the January-March quarter? What did you like in the results so far?

    MAYURESH JOSHI

    GM Raksha....The results have been quite reasonable so far and have met street expectations on most counts. We might have witnessed a few misses in terms of margin disappointments, tepid guidance given by few companies but largely not too disappointed. Large Banks on the retail side have delivered good set of numbers while the corporate/SME exposure banks did indicate stress might continue, Large Cap IT was in line with expectations and largely management commentaries point to a better landscape, Cement companies have delivered as per expectations and hope is on revival of demand leading to earnings growth. A few mid-caps have given stellar performance and one needs to look at the way the earnings in terms of cash flows might improve in a relatively better macro environment going forward. So, decent set of numbers so far, how PSU banks/CapitaL GOODS/INFRASTRUCTURE post numbers in the next few weeks might be interesting as soft numbers from these sectors may pull down the consolidated earnings estimates for the markets.


  • D

    DEBINA

    If you had to select some of the midcap stocks on account of good monsoon prospects, which ones would they be?

    MAYURESH JOSHI

    GA Debina.....A broad perspective would be that stocks related to the tractor space, tiller space, 2 wheeler space, agro chemical/fertilizer space can be benefeciaries of good monsoons. One need to be stock specific within this space as a whole host of companies have run up in lieu of earnings picking up substantially over the next few months. Albeit the earnings catch-up shall happen in the second half of this fiscal. So, select 2 wheeler stocks having rural focus, fertilizer stocks , select few tractor names should do well.


  • J

    JATIN

    In the broader market, sugar stocks have been hogging the limelight in the wake of rising sugar prices. Is the worst over for the industry and what is your take on the industry for the current fiscal? Which are your top two bets?

    MAYURESH JOSHI

    GA Jatin....The sugar production for this crushing season and the expected demand along with the carry-over inventory with provisions for the mandatory exports and weak conditions prevailing in latin america esp Brazil have pushed prices on the LME and the domestic prices as well. With expectations of the sugar cycle turning better over the next two years and debt and leverage stress expected to decrease with lesser production, the realizations for suagr companies are expected to improve. Wait for substantial declines on stocks like Balrampur chini and andhra sugar as they have run up ahead of earnings at this juncture.


  • R

    ROHINI

    Aviation stocks including IndiGo, Jet Airways and SpiceJet have displayed a spectacular rally on the back of falling crude prices. How much upside do you see? Should one book profits at such levels?

    MAYURESH JOSHI

    GA Rohini...A large part of the incremental gains from falling crude prices have been captured by the EBITA performance on most aviation companies. Improvement in passenger load factors, realizations stability lead to improvement in cash flows for most stocks. It is a perspective that one needs to keep as margins expansion here-on shall not be expansive and earnings growth, load factor improvement, reduction of debt shall be seen as re-rating for most stocks within this sector.


  • S

    SANJAY SINGH

    How do you see Indian markets placed as compared to other emerging market (EM) peers over the next one year? Where do you project levels for Sensex and Nifty50 in near term and your investment strategy, given the current scenario?

    MAYURESH JOSHI

    GA Sanjay..India is better placed when compared to the other emerging pack in terms of our internal/domestic consumption story/managable Fiscal and current deficits, strong external reserves, resilient currency. So government reforms and policies and our own demographic dynamics help us standing out in the emerging pack. We expect nominal GDP growth rate of ~12%, corporate earnings should grow by 15-16% translating into reasonable growth for SENSEX earnings as well.


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