Siddhartha Khemka, Head of Retail Research, MOFSL, says “we are much more positive on the two-wheeler space, which is our preferred pick, followed by the passenger vehicles. Within passenger vehicles, we like both Tata Motors and Maruti but our preference right now would be towards two-wheelers where Hero Moto is among our top picks.”

Any of the recent earnings today that may have stood out for you?
Siddhartha Khemka: If you look at the earnings, there are quite a few earnings that have come out specifically from the largecaps and if you look at Sun Pharma that has clearly been a case of much better than expected numbers given that pharma as a sector has not done that well.

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The EBITDA margins have seen quite a significant beat with an expectation of 25.7%, the margins were at 28.8% which led to a sharp beat in the overall EBITDA. So, that is something which is one of the surprises in terms of earnings in the last few couple of hours.

What is the deal with Voltas? The numbers looked weak. Yes, the loss was driven by the project’s business, but even for the UCP business or the cooling products business, it was not a big surprise. What explains this 8% move on Voltas, Blue Star, Havells, etc? What’s your top pick?
Siddhartha Khemka: For Voltas, clearly the performance was weak across segments, specifically losses in the project business, that is this EMPS business. The stock reaction has definitely surprised us. From a fundamental perspective, it looks like a lot of short covering has happened in the stock which is leading to such a strong uptick. The analyst concall is there today at 4:30 which could give some more insights to us in terms of the future outlook.

But as we say, overall the UCP performance was comparatively better than our expectations which could be one reason which the market would be looking at and could have got excited about. And overall, if you look at the stock has kind of underperformed in the recent past because of the weak performance given that the overall sector both Voltas has lost market share in the air conditioning space as well as the losses in the project business.

If you look at the overall space, Blue Star has comparatively done better in terms of results as well as in terms of the overall outlook. I would say that we will have to wait for the management commentary today and then take a call on the outlook on Voltas, but Blue Star with its strong results definitely stands out between the two.What is the view on some of these battery companies? Both Exide and Amara Raja are showing good traction today? Would you be a buyer in these names or are you recommending to just play directly through the auto companies?
Siddhartha Khemka: There is some expectation of recovery in demand, especially from the OEM side, looking at the strong growth in the passenger vehicles sales that we have seen. Auto as a sector has comparatively done well and to top it all, you see you have this new rooftop solar scheme which the government has launched, where again you would require some sort of power storage units that needs to be put across. There are hopes that the Prime Minister’s Suryodaya scheme could improve demand for the battery companies. Having said that, we have a neutral rating on both Amara Raja and Exide as of now, we would prefer to play directly the OEMs where the growth is more forthcoming as well as the valuations are still looking that there could be further room for upside.

Overall, we are much more positive on the two-wheeler space, which is our preferred pick, followed by the passenger vehicles. Within passenger vehicles, Tata Motors, Maruti we like both of the stocks but as I said our preference right now would be towards two-wheelers where Hero Moto is among our top picks. Stocks have moved up, especially in the two-wheeler space, so there could be little headroom for upside, but as a space we continue to like the two-wheelers within the OEMs.

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