L&T and Siemens to be top outperformers in infra and Adani Ports could be a close third, says the Director, IIFL Securities.
Do you think that the temporary stamp duty cut can change the prospects and fortunes of the Maharashtra-based real estate companies?
Sentimentally, it is positive. In the last four months, the market has been looking for sentimentally positive ideas in a world of negativity. If you bought the correct stocks and you waited for the positivity, they have played out brilliantly. I have been an advocate of real estate and I can tell you if gold is going to be Rs 58,000 and you are going to be smiling your way to the bank, then definitely hard assets like real estate will be the next trend setter. Mind my words, 2021 will belong to real estate and that is hard assets. DLF and Godrej Properties have been two of my large picks. Godrej from Rs 800, DLF from Rs 140 have been excellent performers.
The construction companies which have been in the doldrums are starting to see a lot of action on the upside. Nagarjuna Construction, NBCC and mortgage lenders HDFC, LIC Housing. You should see a whole host of these arterial sectors doing very well. Like I said, it is a sentimental positive which tells you the intent. We cannot expect everything from the government but the states have reacted positively. So, a thumbs up from my side. DLF, Godrej, NBCC and HDFC are all our top picks.
Some of these textile plays are holding out very well, especially the ones with global exposure and in particular to the US market. The entire hygiene factor post Covid is also playing along with cotton prices falling 15%.
Correct. The midcaps have been the darling of the market and we are going to see sporadic action in a lot of those counters depending on the news flow and textiles and cotton has been a play. I can suggest a couple of names which are very smallcap but you must watch these. Both Monte Carlo Fashion and Nahar Spinning belong to the house of Oswals from Ludhiana are extremely well capitalised. These are very good brands and they can be the dark horses, if you are looking to play. Welspun and Arvind will be the leaders over here.
What is your view on the platform companies? Could any of the diagnostic names be turned into platform opportunities?
We had a buy on Dr Lal Path Labs at around Rs 1,500 level. It has given superb returns. Four months back, we were one of the few who were bullish on pharma before this trend started and that has played out well on the diagnostic side. We think Thyrocare is another play.
You have seen the platform side of Naukri being an outperformer. Now these are marquee names which are going to be expensive. It is like the FAANG stocks. You got to be brave enough to get into them if you want to make money but like I said, the market is giving you a lot of opportunities. It depends on your risk profile. At Rs 11,500, we do not want to be brave. Here we would suggest some names like a Larsen or an HDFC Life which we think are going to be relative outperformers. So weigh your risk rewards. You have to protect your downsides also and these marquee names have gone up and can see severe corrections also because of the over ownership.
Where do you stand when it comes to consumption? A lot of these FMCG companies have been talking about rural expansion. Multiplex players are now looking at drive-in cinemas in order to at least start accumulating revenues. Your bets within this space?
Four names which I think are extremely well capitalised, very well branded and they are all in different sectors. Godrej Consumer would be my top pick from the house of Godrej. You are seeing Godrej Properties. Godrej Consumer also owns a land bank in Vikhroli which is not part of the business but it is an ownership. It has been one of the best plays on the sanitiser business, the hair dye business and so on.
The other play would be Havells, the best consumer electrical play which has raised prices and I think that is here to stay. Dabur would be my third pick there. Dabur results in the FMCG basket were way ahead of the Street. The fourth pick would be ITC. We are all running after a theme of hotels. ITC has a 7,500 rooms franchise and it forms 10% of the business. It is the third largest hotel player and there should be a rerating because along with the other businesses where the FMCG has started showing traction, ITC could be a relative outperformer by the end of the year.
After the recent upgrades, we see some renewed vigour in SBI. Is there opportunity for investors or should one wait till the moratorium figures are out like and the NPA burden is clear?
As a disclosure, SBI has been one of our top PSU picks, the only one which we think is going to be a top performer. At Rs 175-185, we are still doing a SIP. Sum or parts, if you saw the SBI Cards and the life business, the bank is available just for Rs 60. On top of that, the investment in Yes Bank will be at least a five bagger in the next three years. It is a mix of low bond yields, treasury income and the rural outflow which is very strong. I have a target of Rs 275. As a caveat, the stock has run up from Rs 175 to Rs 215, it has just started to perform. Any dips towards Rs 200 would be a buying opportunity. If you are a slightly longer term then I think it would be one of the best quasi plays on sum of parts and holding company which can outperform by the end of the year.
A quick outlook as to where you are placing your bets within the capital goods/infrastructure basket?
L&T and Siemens. L&T is a no-brainer given the huge execution order book and now all cylinders firing whether it is infrastructure, it is defence of the Middle East hydrocarbon cycle, I think L&T has a way to go. It could be a top outperformer. I have a target of Rs 1,200 by the year end.
Siemens is again a cash-rich, no-debt company and this is again on the power side which will start to see a huge order flow. This quarter’s numbers were very sweet and Rs 1,500 on Siemens would be the target for us. So, L&T and Siemens are two picks which we think can outperform.
Adani Port will be on a cross current of global trade winds and the rise in the Baltic Freight Index bodes well for the stock at around Rs 345-350. We have a target of Rs 425 by year end.
