[ad_1]

Deven Choksey, MD, DRChoksey FinServ Pvt. Ltd, says that while BAT is unloading 4% stake in ITC, it remains a professionally run and managed company. This company would possibly see a higher amount of valuation unlocking which up till now the shareholders have not seen in ITC. I would believe this is a good thing to happen for the company. Overall, the fundamentals of the business remain extremely strong and convincing.”

What’s your view on ITC, given that the stock price is going to be in focus? BAT is preparing to pare part of their stake this week. What should investors do with the stock?
Deven Choksey: Since other fundamentals remain as strong as they were and remaining good potential is continuing in each and every vertical of ITC, I feel this stake sale by BAT to the financial investors is going to be a good thing for the company. Generally, one has seen that when you bring in a higher amount of stake from the financial investors, the company’s valuations eventually get re-rated and probably you will see a higher amount of valuation continuing or maybe growing from here on.

Unlock Leadership Excellence with a Range of CXO Courses

Offering College Course Website
Indian School of Business ISB Chief Digital Officer Visit
IIM Lucknow IIML Chief Executive Officer Programme Visit
Indian School of Business ISB Chief Technology Officer Visit

Several places in the world where the companies are run by the professionals and the promoters, the owners have relatively smaller stake, they continue to hold larger market capitalisation. I believe that is the story unfolding for ITC. Being a professionally run and managed company, I believe that this company would possibly see a higher amount of valuation unlocking which up till now the shareholders have not seen of ITC, likely to see higher amount of unlocking of the valuation in coming periods. I would believe this is a good thing to happen for the company. Overall, the fundamentals of the business remain extremely strong and convincing. It is unlocking which is going to drive this particular stock into the new orbit year after.

What are your thoughts on HAL and other stocks within the entire defence space?
Deven Choksey: It is probably one of the best stocks in the entire PSU basket. If you look at the financials of the company, comparatively in the last five years, this particular company has had a steady run and it has been having a close to 20% kind of ROC as far as their earnings ratios and the valuations are concerned.

This particular company is still available at a good prospects largely because of the fact that on one side the government is putting a significant amount of Make in India defence product kind of an activity, and which is giving the thrust to companies like HAL in a significant manner. I believe that this company remains a strong bet. Maybe it has done as far as the prices are concerned, it is currently valued fairly well.

I believe that the larger execution visibility is giving thrust to this company and at the same time, the other proxies not available in the market for investment, that is where a majority of the funds are getting shifted into this company. Overall, we remain positive on this company and believe any correction in price would be a good opportunity to enter the stock by the investors.A note has come in from PhillipCapital on chemicals. In chemicals overall as a sector, we had seen a bit of a correction coming in recent times. Anything that you find would be looking attractive in the chemical space given that sequentially we are seeing an improvement on a month-on-month basis in terms of demand trends and stable prices that have come in from chemicals. Would you be looking at the sector?
Deven Choksey: Leave aside the commodity play within the chemicals because that is something which we, as outside investors, would never understand. In the discussion that we have with many of the companies, we get a clear sense that on one side the price regime is going to remain steady, that is, the input cost is going to remain steady. On the other side, the business condition in the global market is showing signs of improvement. In the last three quarters of the current financial year, things have been relatively bad for some of these companies because of the higher input costs or higher inventory costs. Now, in the fourth quarter, they are saying that the majority of the high-cost inventory is out of the books and now at least they have got the book which is mark-to-market as far as input-to-output is concerned.

I guess they will have a favourable mark-to-market situation. So, though the numbers are not showing remarkable jump at this point of time, the understanding is that in subsequent quarters, things are likely to improve from what it is currently and we believe these companies within the chemical space, particularly those in contract research and manufacturing space, would have a relatively better outlook to talk about.

They are likely to see a better and steady outlook in FY2024-2025. So, one can argue that the downside has probably been limited. Maybe the improvement in business conditions would mean some amount of upside going forward. We may remain positive as far as the outlook is concerned.

Take us through your top midcap idea.
Deven Choksey: We believe that currently automobile ancillary companies are remaining relatively stronger plays. We have been seeing exceptionally strong performance coming in from most of the OEMs and many of the strong ancillary companies have still been neglected by the market for a long period of time. They had the situation of higher input cost and the margin protection to a certain extent.

But that is now settled and most of the companies are having a better time to talk about. We believe that auto ancillary could be a good bet to buy into the portfolio. Of course, I am not mentioning names, only the requirements of the regulations.

[ad_2]

Source link