Just wanted to begin by discussing the latest news flow coming in on Zomato. There is a bit of a bull versus bear case scenario wherein Jefferies has downgraded the stock, raising a question on the profitability and the valuations while the other brokerages are maintaining it as one of the top conviction buys. What is your own assessment of Zomato right now?
Neeraj Dewan: What I have seen about Jefferies, a little bit about the report was that they are concerned about the competition which is coming in the quick commerce space. There can be some short-term consolidation in the stock because competition is definitely there, like Swiggy and others are doing well, plus Amazon and Flipkart, everyone is coming with this quick commerce and they are going to give them some competition. But Zomato is very well established and they have already been generating profits. So, after the consolidation again the stock if one has a little longer-term view, still has good promise. Quick commerce is a very big field where even if there are two, three, four players, there is enough business that can come their way. So, the growth should continue as far as Zomato is concerned. And after the consolidation, the stock can be accumulated and for a longer-term investor it is still a good investment.
What do you make of the Q3 updates coming in from some of these jewellery companies? I mean, we were all worried about the lab-grown diamonds and stuff, but the festive season sale has been really strong. Macquarie has today increased the target price on Titan all the way to 4,150 and Kalyan Jewellers has reported a revenue growth of 39%, same store sales growth of over 24% and they are expecting this momentum to continue.
Neeraj Dewan: Yes, this quarter is very important because this quarter there should be some pickup which should have happened as far as consumption is concerned, as far as these companies are concerned.
So, what happened last quarter was there were a lot of expectations in certain sectors and there was disappointment and that is how we saw the correction happening in the broader market and the market generally. This time the expectations are not that high and everyone is a little cautious about the result season. So, once the results start coming in and you get some more indication on what this quarter has been, then one can make a little better view on these companies. So, I would rather wait and see how this quarter has been for them.
What is your view on this entire alcohol beverage space? There are certainly a lot of options available in that space. If you want to bet on let us say a beer company or a hard liquor company or for that matter a vodka company, that entire space now seems to be riveting with a lot of options.
Neeraj Dewan: Yes, according to me the growth will continue though definitely I am more positive on companies like United Spirits, I think that is a good solid company which has shown decent improvement in the last couple of quarters.So, I feel that this sector will continue and the consumption which is right now not at par with other countries will grow. So, if someone is an investor longer term perspective, one should have these liquor companies in the portfolio and the growth should continue for them.
What do you do with private banks now because going by HDFC Bank’s quarterly update it does not seem like it is going to be any out of the woods kind of quarter and the pressure is going to persist. Do you think that is going to be felt on the stock prices too?
Neeraj Dewan: I think because after the rally that we saw when the markets corrected also last two-three months, HDFC Bank did outperform but this kind of update which has come from them is again surprising. And a lot of people who had put their hopes on HDFC Bank were really jumping with joy that finally HDFC Bank is giving them decent return. So, there is definitely disappointment and now some people are holding it also and they had again got into the stock.
So, there will be some disappointment which is visible on the stock prices also after the high they saw. So, it is very important to see what they say about the business but going ahead a private sector bank like HDFC Bank, Kotak, if they are giving you an opportunity, they are giving this correction, should be an opportunity according to my understanding because they are still trading at discount to their historical averages.
So, once you see some more pickup happening in demand for credit and interest rates start coming down a bit going ahead, then there is definitely some improvement which we will see in these companies also.
What is your own sense, while this morning we have woken up to very strong handover from the globe, even Asia is doing well, the only market along with us which had fallen yesterday, Japan, it has more than made a comeback and holding up almost a thousand points right now. But for our market alone, does it seem like the pressure could perhaps continue a few more days?
Neeraj Dewan: Actually, correction started from the last quarter results when the results were very disappointing and that time the FIIs selling was continuing, it really increased with some shift to China also happening.
So, it has been on since that time. So, it has been three months, the markets have been like this. Whatever effort they have made to come back, again, they have come down, again, the corrections have happened, a lot of volatility is there.
So, for our markets, certain things need to change domestically. Results, while this time the expectation is a little low than what it was last time, so if the results are better than what people are expecting than that can really trigger the next move from these levels, but fundamentally we need to see how the results are panning out and then if based on that you see some slowdown in the FII selling, that will lead to some recovery in our market. So, we need to sustain recovery to happen, which has not been happening for the last two-three months.
But just wanted to put the spotlight on consolidation which has been happening in the sector and both cement and paints are the two sectors wherein consolidation is underway. For cement, of course, Nuvoco Vistas is going to be in focus specifically today on account of that resolution plan which they have won and they are the preferred partner for that and AkzoNobel is reiterating its comments about selling off part of the stake, they are talking about the decorative’s business also being, the powder coatings business to be honest, which they are considering hiving off. These two sectors have been going through consolidation but the stocks too have been going through consolidation, which is a bit of a dichotomy. When do you see them breaking out?
Neeraj Dewan: I think like paint sector is concerned, there are two big players which have entered this space and there is competition which is very heated up there. But you have these good old names like Asian Paints which have corrected a lot. So, there is definitely opportunity there which are very strong companies. They will continue to do well if you are a longer-term investor. So, one should use this opportunity to get into the stronger name. And similarly, cement space also, there are a lot of capacities which have come or coming. So, I think there also you have seen good consolidation happening like the names like UltraTech Cement, which are doing very well.
They have also consolidated some companies, they have taken over some companies and they are becoming much bigger space, bigger companies, bigger capacities. So, something like UltraTech Cement in the cement space and Asian Paints in the paint space for a long-term investor one should use opportunities, whichever way, whenever they are correcting and giving you opportunities. And UltraTech Cement is stronger and you have seen price movement also happening there. The stock has been doing well. So, one should stick with the larger names there and have some longer-term perspective.
