Chakri Lokapriya, Managing Partner, RSB LLP, says among T&D companies, Skipper is one of the largest companies globally and in India, they are present not just in manufacturing but also in EPC. The stock has valuations on its side. Demand has been weak for the last two years for well-known reasons. Now the cycle is picking up; Second is JTL Infra, again a bet on the manufacturing theme. They are doing capacity expansion to meet demand and valuations are on its side. These are the bets largely revolving around manufacturing and capex themes.”

There are two moving parts, especially when it comes to the commodity construct. A) The rip-roaring ride that we are seeing in metals and B) the uptick in crude that the market is sort of ignoring. What do you make of the move in metals so far?
Chakri Lokapriya: If you look at what is happening in metals both domestically and globally, the US data has come out stronger than expected. Their services are weaker, but the economy has kind of bottomed out though it continues to be strong. Similar data is coming out of China. All this means that cyclically commodity prices will start moving up with industrial activity picking up both domestically and globally. Prices of copper and other commodities have already moved up and will continue to move up if industrial activity holds up. That is now being reflected in the stocks, both domestically as well as outside India and they have also underperformed. It is time to look at them as well.

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Let us get your take on some of the updates that we have got within the banking space. The kind of Q4 updates from the likes of South Indian Bank, RBL, seem to be fairly encouraging. What is that indicative of?
Chakri Lokapriya: Indeed, all this data clearly shows that manufacturing activity, capex, industrial is where the largest loan disbursements have been in India and therefore banks which cater to that, which is largely the public sector banks and some of the private banks like to an extent maybe RBL, are ones that will disproportionately benefit from this current move.

Given that we have seen a lot of focus on the premiumisation trend, how are you looking at some of these companies within the consumption space?
Chakri Lokapriya: You are absolutely right in terms of premiumisation and the demand still seems to be urban versus rural. There is no change in that and so, which means all the urban consumption, consumer durable plays will continue to gain traction, not just tier I, but also tier III, tier IV cities. That means for companies like Voltas, the summer is going to be hot. Even Crompton Greaves, which has underperformed significantly, are the kind of companies we will begin to look at.

I want your comments here because the standalone revenue has seen an uptick of 20% on a year-on-year basis, but what really stands out is the aggressive expansion and the kind of store addition that they are planning to do in the first quarter of FY24,. They have already added 24 stores.
Chakri Lokapriya: Yes, absolutely right. Store expansion has come back which is a good thing. The volume growth has also come back. So, two good things. But the third thing is that the stock already trades at about 60 times multiple, which reflects all the improvements that they were to expect., I would not really be chasing Avenue Supermarts at 60 times multiple right now.

How are you looking at things building up within the entire real estate space? If you had to nail it down to some of the top recommendations, what would it be?
Chakri Lokapriya: Brigade is extremely well positioned in the current outlook because of the demand from commercial as well as residential and also there is some work going on within their hospitality space. So, there might be some valuation unlocking over there. I think Prestige and Sobha still look good.Why do they look good? I mean, what is the benchmark for you to say they look good?
Chakri Lokapriya: Prestige simply because of commercial and residential new product launches and there is also going to be some amount of value unlocking in their hospitality space. Hospitality trades at a far higher valuation and as the unlocking happens, Prestige will benefit from that.Tell us a bit more about your top three holdings.
Chakri Lokapriya: We have been focusing mainly in the pickup and manufacturing. Now, T&D has, with this huge amount of power demand as well as expected pickup in capex, one of the main beneficiaries in that space value chain is the T&D companies.

Among T&D companies, Skipper is one of the largest companies globally and in India, they are present not just in manufacturing but also in EPC. The stock has valuations on its side. Demand has been weak for the last two years for well-known reasons. Now the cycle is picking up;

Second is JTL Infra, again, the manufacturing theme. Electric pipes are used both in construction as well as in industrial activity and they are doing a capacity expansion to meet the demand and again, valuations are on its side. So, these are the bets largely revolving around manufacturing and capex themes..

Now brokerages are turning pretty bullish in pipe space. Is there anything within that sector that interests you or have you looked at another niche space that merits a look?
Chakri Lokapriya: Pipes as a space is looking good. For instance, Hi-Tech Pipes, is a similar company, but this company is also into industrial demand and they make all these electric steel pipes, coils, etc, that are needed in manufacturing as well as in construction. All these companies did well about 10 years ago. After that, nothing much happened and they are all coming back and valuations are on their side and balance sheets are stronger. So, Hi-Tech Pipes is yet another company and Prince Pipes also looks good for the same reason.

Among the IPOs which have come out in the last six months, is there anything where you have taken a sizable commitment?
Chakri Lokapriya: Park Hotels. It went public recently and the valuations of Park Hotels is far lesser than that of any of the publicly traded Indian Hotels, Lemon Tree, etc. It is below an Indian Hotel space and above Lemon Tree in terms of its hotel properties. They have 30 properties spread all over the country and the valuation multiples are far lesser than any of these other hotels and so I think that is another company that we recently got into.


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