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Yogesh Mehta on why he is bullish on 2 midcaps for long term

Good growth companies are still available at reasonable prices.

ET Now|
Aug 30, 2019, 04.47 PM IST
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PVR and Oberoi Realty are the two midcap favourites of Yogesh Mehta, Founder, Yield Maximiser. Excerpts from an interview with ETNOW.

History says that some of these big PSU bank mergers have not really had the best start --- be it SBI with its subsidiaries or BOB with Vijaya and Dena Bank. Who do you think could be next in line? There is talk about a United Bank, PNB combination with small PSU banks. Would that be a wise idea?
The meeting agenda is for the PSU bank merger. Post Baroda and Vijaya Bank merger, the next one should be Oriental Bank of Commerce and Union Bank of India maybe with SBI because PNB is still struggling with the balance sheet asset quality as well as the higher NPA numbers.

If that gets added by banks which are getting merged into it, then the balance sheet will go to almost zero or negative trend.

How are you reading into the metals basket? That sector is active in trade today although while the metals index is holding out. It can be attributed to the fact that China is willing to get back to the negotiating table. The metal sector is directly linked to the ramifications of the trade war. How do you see prospects shaping up here?
Since the day US-China trade tensions have got ignited, the metal sector has been dull and always reacting to news flows -- both positive and negative. The stock prices and the valuation all have now come down and demand is also slowing down over the global economy. The auto sector is in a slow lane and it has impacted much to the demand from the metal side. Put together, this has driven the stock price correction. There is a flip flop on the US-China trade tension and now it has gone to a level where both the countries are now agreeing that they are in peace talks. That may drive some sentiment on the positive side though the demand outlook will not get changed overnight. This is probably not a bottom, but yes a bounce can be expected from here into the stock price.

What are your own thoughts on high-end consumption companies like Page industries, Trent. Within consumption, which you think can still be bought after the recent correction?
In case of Trent, now the growth has tapered because of the higher base impact and there was a selling by the promoter last year and that has dampened some sentiment. But the growth has gone down in last two quarters.

Around current levels, it is still quoting at around 45-46 times PE multiple forward or maybe higher than that. I would it will be a neutral kind from my end. I will not be gung ho about that. But on the consumption side, in the brick and mortar space, D-Mart has a higher PE multiple but I would bet more on growth rather than value. At least 20-22% PAT growth rate is visible for FY20 and 21 put together and the PAT will be growing from Ra 900 odd crore to Rs 1100 crore and Rs 1200 crore for the next year. I think good growth companies are still available at reasonable price,

I would opt for D-Mart and Titan where the growth momentum is still intact and 20-22% growth rate has been guided by the management. Gold prices are higher but still demand is very strong. The festive season and marriage season are coming and as per the Indian culture, Titan will remain in demand. Also the price has corrected from all-time highs of Rs 1,300 odd to Rs 1,000 of late, but now it is nearer Rs 1,100. It would be a good opportunity for investors to add it into the portfolio.

Can you share with us some midcap ideas for our viewers?
For midcaps, one would be PVR, the only entertainment segment which is available for the Indian middle class as well the higher class people. It would help the stock. The films are now earning Rs 300-600 crore and average ticket size around Rs 100-105 for PVR and non ticket revenue is also contributing at least 40-42% of the top line number.

The number of screen additions is also as per the predictions by the management and still they are adding more and more in the south as well as in the north. PVR is available at a reasonably valuation currently and has growth aspects.

It has corrected currently because of the announcement by Jio on the first day first show but I think on the regulatory side, it will not be impacted much because of the regulatory environment which is very much protecting PVR’s rights and OTT is also not getting too much frenzy. Overall PVR would be a better bet in the midcap idea.

The other one would in the real estate sector, where Oberoi Realty is my pick. The stock has corrected again. It is debt-free company and Mumbai is the only place where they are doing very well and they have advantage of completion of the projects on a timely basis. ROE and ROCs are not up to that extent but still on a moderate rate, it can be increased further from next 1-3 years. Oberoi Realty is one stock where I would look at on the long-term investment as a midcap idea.

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