Commodities are cyclical and there is money to be made if you catch the right cycle, says Gurmeet Chadha, Co-founder & CEO, Complete Circle Consultants.
On Vedanta delisting and retail investors
It is an avoid for me. The offer price could be revised, especially if you arrive at a book value after excluding reserves it does not send a good message. And this is not the first time that they have done it. I do not want to comment too much on that but I think there are better commodity plays. Commodities are cyclical and there is money to be made if you catch the right cycle. And if you want to be tactical here, Tata Steel and some of the other names are better bets.
On cement stocks
We like two cement stocks. One is ACC, it is available at slightly below replacement cost. It is one of the largest players in the ready mix concrete (RMC) space. RMC is fast catching up for urban development and construction work.
We also like Shree Cement despite the rich valuations. They have a very good strategy involving a differentiated, high frequency low magnitude expansion. They are a dominant player in east and north. There have been price hikes in a few pockets and they have efficient cement plants. Their water consumption is probably one-third of the other normal clinker cement plants.
On Titan
The price point probably does not give too much comfort to add more positions but people wrote a lot of obituaries on the company seeing the Q1 numbers. What surprised the street was the recovery rate that the management talked about which was 98%. Even their watch and wearables were back at 55-57%. The walk-ins have picked up. The main portfolio in the jewellery segment is the wedding jewellery and the studded collection which is seeing some recovery in light of the coming festivities and a long marriage season ahead. But as I said, the price does not give too much room for margin of safety. It was probably a great buy below Rs 1,000 but not at the current price.
On gas pricing reforms
Prima facie, these appear positive but we will have to look into the final details. I do not see there is too much stress on the City Gas Distributors because it is a growing segment. All three segments — households, vehicles, and commercial establishments — are getting traction and it is either a one-player or a two-player market in each circle they are allotted. I do not see much stress there but probably we will have to evaluate the others like ONGC and Oil India.
I still think that the better play in this which is not a pure gas play is BPCL at Rs 340. I understand that the disinvestment process has been delayed but as a great marketing infrastructure including installations, depots and LPG distribution, the Kochi project had been delayed or the PDP project which got delayed because of Covid should hopefully come back on track. The Kochi and Mumbai refinery are getting back to pre-Covid levels. Petroleum sales are back, we have surprises in marketing margins in Q1 despite the volumes being lower. From a risk reward basis, BPCL fits the bill and it is one of the crown jewels as far as PSUs are concerned.
