Varun Saboo, Head-Equities, Anand Rathi Shares, says “I do not see any material upside in Maruti from here. It is a great structural play. If we talk with a perspective of two-three years, then yes, Maruti is still a great buy. Do I see it compounding by say around 15% plus every year, it will. But if we are talking about what I would be really excited about would be something in two-wheelers. I am very bullish on Hero MotoCorp and I still remain very positive on the name. Two-wheelers are just the beginning of the upcycle.”

What are your thoughts on largecap pharma names? The view is that many of these largecap companies may continue with strong performance. Lupin and DRL hiked their guidance last quarter. Aurobindo and Sun were good. Will this kind of momentum continue this quarter?
Varun Saboo: I completely agree with you on this point. The thing which is happening in the US is that pharma companies, pharma distributors are giving an extremely positive view. On the ground situation, they are mentioning price erosion at least for the next couple of years. So that is a very positive outlook which is coming from there. We also saw Sun Pharma’s Taro business reporting and they reported a very healthy performance. So, it is visible that the US is looking quite promising. And all of these names should do very well. Sun Pharma is one of the names. Aurobindo, Zydus Life, etc, they are looking very nice. I would completely agree with your point and as such also as a house we are focusing more on larger caps than midcaps in the current scenario.

What about infrastructure as a theme and I would request my producers to pull up IRB Infrastructure and a one month chart at that, that stock is up around 60%, today as well it has seen quite a bit of spike. NBCC is another stock which is seeing quite a bit of up move while the rest of the market is a bit of a tumble. HCC is the other turnaround story. That stock is up around 42%. Would you attribute this purely to a pre-budget move or structurally as well there is case and value in some of these infrastructure names?
Varun Saboo: On a macro standpoint, our country has moved up leaps and bounds when it comes to infrastructure and it might be any infrastructure. Right now, we are talking about pure play infra companies and obviously they are doing very well. The biggest thing which is going on in the country right now is balance sheets getting delivered, companies trying to get off the debts from their books which has been the issue of the past of these companies, so that has been happening, plus there is so much that we are seeing as development in our country.

I do not think it is only a pre-budget move. The things which are happening on the ground, the way these companies have been doing their business now and the outlook seems extremely promising to me. I remain extremely positive on the infra theme as well in the country.

What are you looking at as far as lenders are concerned? Beyond the banks, microfinance, some of the housing finance companies or maybe some Indiabulls Housing kind of companies are trying to resurrect itself. Muthoot Microfin has been talking about 35-40% kind of growth. Anything you like there?
Varun Saboo: We have seen a very sharp rally in the microfinance names. For the last couple of years, they have been in a very strong run. So, I would be a little sceptical on the microfinance side for now considering the fact that these are cyclical plays and there has been a kind of rally which we have seen and these are plays where you will see time and again some pressure on asset quality which will keep coming.

So, I would be a little cautious. I am not saying there is any worry right now but will not be extremely positive on these names for now, but yes housing finance companies still look quite promising. The kind of run we are seeing in terms of how real estate sales are happening in the country and at every level be it at the premium segment or at the lowest strata. We are seeing a very strong demand in terms of real estate and that will clearly reflect in these housing companies and scenario in terms of collections, etc, has also been quite good.

We are seeing asset quality being quite fine with them and these are not expensive names at all. So, this is definitely among the NBFCs a very good place to be in.

What are your top picks as far as the metal pipe companies are concerned? Venus, Prince Pipe came out with their results. Man Industries is surging 12% ahead of the QIP. In general we have seen these metal pipe companies doing well on the volume front. Do you have any top names? Do you study this space?
Varun Saboo: We have coverage of only one name as of now. We cover Venus Pipes and yes, we remain very bullish on the name. They are doing extremely good business. Their growth rates have been very sharp. Their capex which was going on has been completed and they are delivering absolutely on what they have been talking about. So, their deliverance has been very good. We have seen the numbers being very strong. We are seeing the kind of demand trajectory which has been there and how the company is also delivering. So, yes, it is a combination of both and we remain very bullish on the name.

What do you make of Maruti at this juncture? We were getting a story just earlier that this trouble at Toyota also could have a negative ruboff for Maruti in the extreme near term because there is a lot of activity between Toyota and Maruti. Maruti with its own badging sells a lot of Toyota products. Is it an attractive buy or avoid at this current valuation?
Varun Saboo: We have seen a very strong rally in passenger vehicles. Again, it is a cyclical play. We have seen the kind of demand which was there. PVs as such have played over the entire rally which was there. I do not see any material upside in Maruti from here. It is a great structural play. If we talk with a perspective of two-three years, then yes, Maruti is still a great buy.

Do I see it compounding by say around 15% plus every year, it will. But if we are talking about what I would be really excited about would be something in two-wheelers. I am very bullish on Hero MotoCorp and I still remain very positive on the name. Two-wheelers are just the beginning of the upcycle. We have started seeing the numbers coming now where the growth and all is coming much better than what we are seeing. I would be more positive on two-wheelers than four-wheelers for now and I would be more positive on Hero MotoCorp.

From the midcap segment at Anand Rathi, what are your top ideas which you can share, house calls?
Varun Saboo: Among the midcaps we like Sansera Engineering a lot. This is an interesting auto ancillary play. One must have this in the portfolio. We are extremely excited about it. The second is Mastek in the IT space. These are two names which we really like. We see Mastek as a very interesting turnaround candidate.

Two stocks are trading at right now versus where do you see them head?
Varun Saboo: You are talking about the valuation?

Yes, valuation picture for both of them.
Varun Saboo: Sansera would be somewhere around 15-16 times, we easily see this going to 20-23 times. We see at least a 40-50% kind of upside on a 12-month basis, do not see any challenge there. In terms of Mastek also, we see a 30-40% kind of upside on a 12-month basis.

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