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Pankaj Pandey: On Exide, the overall numbers for the quarter look slightly lower than what our estimates have been. So, while volume growth for the industry was some 16% odd, the company’s top line grew by 13% odd, which is why numbers were slightly below expectation. But we like both Exide and Amara Raja largely because of the perspective that Exide is one company which is taking tangible steps in the lithium-ion battery manufacturing space and it will be the first EV cell manufacturing company.
So, obviously, it will get a first mover advantage. This is one stock which has been our conviction buy for some time and with the target price of Rs 335, we will review the target prices. We like both the companies structurally. Valuation-wise also, it is quite comfortable for both the counters.
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CARE Ratings came out with a very good set of numbers yesterday. At Rs 187, have you looked at the numbers of the valuations and especially there were half a dozen other rating agencies which had come up which the regulators clamped down upon. Now it is almost like an oligopolistic market. Only the top tier, CARE and ICRA are the ones which are getting the bulk of the work. Do you like that stock?
Pankaj Pandey: I have not really tracked the company but structurally, yes, things will look good for some of these rating agencies because the government or RBI is also pushing banks to chase corporate bonds plus a lot of fundraising can happen from the corporate side. So, obviously, that will require rating as a service. So, the outlook is good, but within the BFSI space, we like the PSU banks. These are the banks where the credit deposit ratio is quite comfortable.
The overall asset quality has been fine for most of the banks. ROAs are inching towards 1 and some have even crossed more than 1. So, within the BFSI space, PSU banks look very attractive to us for the next three to six months or even for a year.
What is the view on IT. Numbers coming out from Tech Mahindra and even BirlaSoft were quite strong? What do you make of it?
Pankaj Pandey: Tech Mahindra with 1% or 1.1% growth, obviously, is better than what was anticipated. I think the bigger overall improvement is expected only when the company comes out with the full year guidance after next quarter. But this is one company which has not done much of a price performance trading at 13, 14 times. Our sense is that probably a change in strategy from M&A led growth to a more organic growth will be a key positive. The margins have bottomed out. So, we like Tech Mahindra quite constructively.
In BirlaSoft also, numbers are quite good with around 1.8% growth. So, this is one company which also has been doing well in the tier-2 space. Margin at 16% looks sustainable. So, from that perspective, this company also looks attractive to us.
I want to ask you about those numbers because at TVS, we were working with a 10% margin and we were very excited when that happened. It has already passed 11% and now Bajaj Auto is expected to come up with a CNG-based Chetak next year. What do you see the prospects of these two companies now?
Pankaj Pandey: On Bajaj Auto, numbers, especially margins at 20% are pretty good. This is despite the fact that there was a bit of adverse product mix, three wheelers being lower compared to two wheelers. I think the numbers were good for Bajaj Auto. The only challenge is that it is trading above long term averages in terms of valuation. Also the export segment of the market will take some time to recover because some of the key markets are still struggling with the dollar shortage. But do not expect much of a downtick in the stock because the numbers were quite good. TVS continues to remain an outlier, given that now EV volumes are nearly 4.5% of the overall numbers. That is one thing which is helping the stock keep outperforming their respective peers. So TVS looks structurally more positive if they are able to sort of keep doing well on the EV side. Bajaj is also okay, but valuation wise, it is on a higher side, which is where between the two, TVS relatively looks better.
If Titagarh indeed moves away from traditional AC to all these railway related opportunities and much more, would the Street give them a slightly different multiple?
Pankaj Pandey: I do not track this stock, I would not be able to comment but we see a lot of companies venturing into railways. Ramkrishna Forging, for an example, is venturing into wheels. From that perspective, railways as an opportunity are looking very good. Only worry is the kind of front-ending news being built or the kind of valuations some of these stocks are commanding. We would prefer if some bit of a consolidation happens in between.
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