Why Siddharth Sedani is betting on ITC & Deepak Nitrite
Deepak Nitrite profits were up by around 178%. EBITDA margins jumped to 23-24%.
Bajaj Finserv seemed to be leading the way today. What is your take on the kind of momentum we are seeing currently?
Talking about Bajaj Finance and Bajaj Finserv, the results were quite good and we were very positive on the stock since Rs 2,800 levels. We believe the stock has a potential and it is a consistent performer.
After a nine-day decline, the market has been rising since Thursday but I would still persist that volatility will be there in the market. Not only until the election results, but post that also. We believe one has to be very picky. This earning season we have been seeing there are mostly misses than hits, so from an overall perspective, earnings are a little tepid.
Added to that, from an overall perspective, the macros are not that exciting. On the global front we know the concerns which are coming. Eventually one has to pick and choose in terms of the market. You cannot go sector specific, you have to pick and choose the particular stock and go about it. This should continue till the election results are out.
There has been constant news flows in many of the pharma names that prove to be disruptive. Also, what kind of price action is there?
That is the case with Sun Pharma and other pharma companies. The pharma space is really vulnerable in the current situation. I still believe that the biosimilar side of the business looks very interesting to me. Biocon is one of the company’s which has strong revenues and in fact in the coming quarters also, the revenues will be coming up more consistently for Biocon.
Biocon could be the one stock with a target of Rs 823 where we like the story. Although a correction despite quite strong results. There was growth expectation in biosimilar drugs. I still believe that Biocon looks the most interesting in the pharma space.
How do you think Tata Consumer Product, the new entity formed by the merger of the consumer division of Tata Chemicals with Tata Global, is going to function? They are focussing on their core competency, in tandem with the plans that they had laid out earlier. Is it a positive move?
Yes, of course it is, and that has been reflected in the price also since yesterday. However, most of the things are priced in. Consolidation will definitely reap fruits for the company but with a long-term perspective.
One good thing which happened after consolidation is that a right valuation parameter can be given to a particular set of business, which is a strong moot point for Tata Global now.
Overall, Tata Global had been an underperformer in last two years. We do not have a recommendation on the stock but I think this move will definitely attract valuation for the stock from the analyst community.
Do you see demand growth returning soon or is it a longer term horizon you have in mind? What is the strategy?
Of course, it has a long-term horizon and the kind of numbers that have been posted both on the volume front for cigarettes as well as FMCG are as per our expectations. Going forward, we may see volume growth coming up. Once we look factor in monsoon in the next three months, FMCG play will be definitely coming up well in terms of volumes and that will be the case with other FMCG plays also.
Having said that, ITC looks very interesting and compared with its peers in valuation term, it is well priced. This is a good time to buy ITC with a target of Rs 352.
It is going to be a fairly interesting week next week. On Monday, we will see a lot of outcome based on the election exit polls. What are the top midcap picks? Is there any particular sector that you would be pinning your hopes on?
Yes, of course. In the midcap arena, we have been surrounded by companies which have been putting vulnerable numbers. One of the quality plays which we have picked up from the speciality chemical is the Deepak Nitrite. The numbers were quite good. Profits were also up by around 178%. EBITDA margins jumped by 10% to 23-24%.
On the back of phenol and acetone chemical a new plant which was commissioned in Dahej and we believe the kind of commentary which the management is posting, it seems a strong jump in revenues is expected in the quarters to come.
We believe this stock can deliver strong returns, strong numbers in terms of performance is concerned. We like this story in the speciality chemical play with a target of Rs 346.