00:00 Hello and welcome to BQ Primer. Very good morning to all the viewers. I am Heeral Dattia.
00:04 Clearly, after the kind of selling that we saw in yesterday's session, the downtick has
00:09 continued specifically with regards to broader markets as well because you see the mid-cap
00:13 index which is seeing cuts of almost around 1.3%. If you see in terms of Nifty 50 as well,
00:20 we are trading below those 20,000 levels already in session today. The breadth overall is in
00:26 favour of the bears. But let's welcome in our guest, Sunny Agarwal from SBI Cap joins
00:31 in. Sunny, good morning and welcome to the show.
00:36 Good morning and thanks for having me on the show, Heeral.
00:38 Always a pleasure to speak to you. Sunny, overall, let's start with a few of the names
00:44 or even in fact, before we get on to individual names, what's the sense that you pick up specifically
00:49 with regards to the broader markets? The kind of crash that we've seen, I wouldn't call
00:54 it a crash actually, a sell-off that we saw yesterday which has continued today as well.
01:00 Is this a one-off or are you seeing now that profit booking will continue?
01:04 So, definitely, there was a slight euphoria in the mid-cap and small-cap space. So, before,
01:11 just based on the order books or a few positive commentary, the stocks were running up 15%,
01:17 and then this correction was deep. Anyway, it's a healthy correction. So, what I feel
01:23 is that maybe a short-term support like 20 DMA or 50 DMA may be tested again on mid-cap
01:29 and small-cap side. But in quality businesses where there is a long-term visibility in terms
01:34 of earning growth, we may see some buying emerging at a lower level. But having said
01:39 that, what I feel is that at the current juncture, large caps are looking more comfortable in
01:43 terms of valuation. So, definitely, the rotation is likely to happen from mid-cap to large
01:48 cap for next 15-20 days. And if somebody is investing in mid-cap, small-cap, then one
01:53 needs to have at least investment horizon of three to six months to make a decent money
01:57 at the current juncture. So, clearly, the focus is on large cap. As of now, mid-cap
02:02 and small-cap will enter into the consolidation more for next month or two.
02:06 Right. So, my key question then comes up is, if you're talking about large caps as well,
02:11 let's pick up the ITPAC. TCS enforces HCL tech. What's your view?
02:16 So, yeah, definitely, ITPAC has been an underperformer in the entire rally during last three to four
02:24 months. And what I feel is that, again, ITPAC is looking, maybe the upcoming US Fed meeting
02:31 on 20th of September, that will be one of the key drivers for global cyclical like IT
02:38 sector. Because anyway, the Fed is entering that US Fed meeting with an expectation that
02:45 US Fed may not raise the rate in the upcoming meeting. However, they may consider raising
02:52 rate in the month of November. But anyway, that's the discounted. But in terms of valuation,
02:58 definitely, ITPAC is looking decent at the current juncture. And but I don't know, I
03:03 mean, in terms of stock price appreciation, whether imposes will head towards 1800 in
03:07 next next three to six months, that I'm not aware about. But definitely, somebody has
03:12 got a view of 18 to 24 months, then definitely one can look at companies like Infosys, TCS,
03:17 HCL tech, and gradually accumulate those companies.
03:19 Right. So that's the regards to IT majors. How are you looking at NIT? Last three days,
03:25 we've seen a spectacular rally that's coming in in terms of NIT. What's the sense that
03:29 you pick up and what would you advise?
03:32 So I was checking corporate announcement of NIT. I didn't see any major announcement
03:38 coming from the company side. But what I feel is that the seed is buzzing with an expectation
03:43 that the company, the business is turning around and with the company has went on record
03:47 to say that they are likely to enter into new business segments. At the same time, they
03:52 have got a cash of 600-700 crore on their book, which they may be looking for some M&A
03:58 opportunity. So maybe kind of a turnaround story, a play on training and development
04:03 business. But to be frank, I'm not aware what is the development which has led to this ferocious
04:11 rally during last three days. But if somebody is a long-term investor, definitely one can
04:15 look at on a buy-on-deep in NIT. As of now, there is no development which is in the open
04:22 market with the investor.
04:24 Right. KEC International is another one which did see a strong move in today's session on
04:28 the back of an order win. With the recent order flows coming in, what's your view on
04:32 KEC International?
04:33 Yeah, definitely. So we have seen a lot of orders for all the transmission and distribution
04:39 companies and that is led by increase in electricity penetration in India as well as with the railway
04:45 KPEC program. And at the same time in KEC, what we are seeing that from last two, three
04:50 quarters, there is a sequential improvement in margins. At the same time, companies went
04:54 on record to say that they will end this year with 20,000 crore top line and 7% EBITDA margin.
04:59 So again, a kind of sequential or kind of improvement in margins. So one can definitely
05:05 look at all such companies. Again, the stock has run up significantly to buy-on-deep. Gradual
05:11 buying is advised in even the cap goods companies or infra companies like KEC International.
05:16 Right. So that's with KEC International. Moving on, you have Coal India that is in
05:22 focus as well. Overall, in between a couple of days ago, we did see some good moves in
05:28 terms of Coal India. How are you looking at the company?
05:32 So definitely, as the opportunity is drying up, the people are talking to the stock which
05:38 are undervalued where there is a good dividend yield. So Coal India is one of that story
05:43 which I feel, I think market cap is around 1.7 lakh crore. Company generates profit to
05:49 the tune of around 20,000-25,000 crore. So trading at less than 60, pays dividend of
05:54 annual dividend of around 20 rupees, again a dividend yield of 8%. At the same time,
05:59 with the increase in power consumption, it is expected that the free coal with the company
06:04 auction in the open market, their relations are likely to improve for the Coal India.
06:09 So I feel, again it's a value buy. We may see some minor growth in FY24 in terms of
06:15 earnings which will be clouded by the increase in employee cost. But again, it's a value
06:20 buy and one can look at the Coal India from a long-term perspective.
06:24 Right. How about Tata Power Sunny? Overall, they've just got $425 million is what they've
06:32 raised in their renewable energy arm from DFC. How are you looking at it? Because now
06:38 the focus is shifting to renewables.
06:41 Yeah, definitely Tata Power is a conglomerate which offers you a play across the power sector,
06:48 whether it is generation, whether it is transmission, whether it is renewable, whether it is electric
06:53 charger for vehicles, whether it is mining. So they have got their own captive mines also.
06:59 So it's a combo play on entire power sector and definitely as the renewable energy portfolio
07:05 scale up and anyway it is also growing at a faster clip. And now with the power shortage
07:10 in the country, what I feel even the thermal power producers or generators are getting
07:16 a boost in terms of likely increasing power tariff. So I feel that Tata Power is well
07:20 placed to encash on this opportunity and definitely it should be part of your long-term power
07:25 portfolio.
07:26 Right. Another stock that I want to discuss with you is Phoenix Mills. How are you looking
07:33 at Phoenix Mills, taking into consideration, one, it's real estate plus a pure play in
07:40 terms of consumption as well. So how do you look at Phoenix Mills in trade?
07:48 We are definitely Phoenix Mills, one of the largest retail mall operator of India. At
07:52 the same time, it's a play on urban consumption story. And time and again, we have seen commentary
07:59 from the many consumer companies that the consumption is holding up very well in the
08:04 cities, in the urban areas. But then that's the problem in the rural area. So I think
08:10 urban consumption is buzzing and I don't think so any issue with the Phoenix Mills in terms
08:14 of growth, in terms of football or any operating metric you talk on retail business front.
08:21 But having said that, the stock has already discounted all the positive factors. So buy
08:27 on deep, a gradual accumulation is a strategy one can look at from a Phoenix Mills perspective.
08:33 In fact, one can look at other retailers like Trent, which is delivering a robust growth.
08:40 In fact, they are reporting an industry-leading growth. So whether it is in terms of sales
08:45 growth, store expansion, I feel even Trent is a good alternative in terms of retail play
08:53 in addition to the Phoenix Mills.
08:54 Right. So Trent, another one that one should be watching out for. GMR Power and Urban Infrastructure
09:00 jumped in trade and this is on the back of the smart metering order that they won in
09:04 Uttar Pradesh. What's your view on the GMR Power?
09:08 Yeah, definitely that entire space of smart metering is buzzing with the order. So we
09:13 have seen a lot of order flows for other players like Genas also. And hence GMR is also one
09:21 of the beneficiary of this initiative. And one has to keep in mind that this initiative
09:25 will, it's a decade-long story. So we will see all these company manufacturing smart
09:31 meter, then they will be deployed at the consumer end. And then there is an angle of AMC which
09:35 is involved, which will run for the next 10 to 15 years. So it's a long-term story, a
09:40 structural story as far as smart metering business is concerned. And one can definitely
09:46 look at stories like GMR. There is another company, Genas, which is where we have seen
09:50 a tie-up, GIC Singapore, investing in a JV with that company. So entire space, we can
09:56 see a good earning growth over the next 10 to 15 years.
10:01 Right. So that's with regards to the companies which are getting orders in the metering system
10:06 as well. Lots of stocks that we've discussed so far. Thank you, Sunny, so much for joining
10:10 us on the show and sharing the views. But clearly, the selling does continue in terms
10:15 of broader markets. But the key question from here on is going to be, is money expected
10:19 to move from the broader markets to the large caps as well? And is that going to help us
10:24 sustain the rally from here on? So lots to watch out for in terms of market conversations
10:29 that we will continue to get you on BQ Prime. Please stay tuned. And thanks for watching.
10:33 Bye.
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