Monday, December 6, 2021
HomeMarket Live UpdatesWhat to watch out for in Bajaj Finance, IRCTC & Asian Paints?

What to watch out for in Bajaj Finance, IRCTC & Asian Paints?


Some time correction is desired in this particular counter if not price correction because there has been a sharp price correction. That would mean that a buying opportunity would be right for the company because anybody who would like to buy it today may not want to wait for three years to get his first return out of the investment, says Deven Choksey, MD, KR Choksey Investment Managers.

What are you expecting from ?
We are looking for growth in this particular quarter. Up till now, Bajaj Finance has remained a little bit muted as far as their lending aspects are concerned in the previous quarter, largey to safeguard themselves from the non-performing assets creation during the uncertain period. They have probably remained a little bit on the safeguard on that aspect but in the July to September quarter onwards, Bajaj Finance has been systematically expanding the loan books and that is where we could be seeing a growth in the loan book in this quarter.

This quarter is also likely to help the company because of the festive season and the demand related to festive season and that is another aspect. So unlocking on one side along with the festive season being there, the company is expected to grow. I am yet to find the management commentary suggesting the gross selling of investment products along with the loan products. something which they had done in the first quarter of the financial year. I would like to see their commentary coming on how exactly this is going to make a change as far as the second half of the financial year is concerned. All in all, put together we could probably see Bajaj Finance returning back to 30-35% rate of loan book growth from this quarter onwards. That is something one can watch out for.

Now that big stocks like Asian Paints are getting a thrashing in the market, is it time to or nibble in any of the paint stocks?
On one side, the correction is already taking place in the valuation. The prices have already started coming down. However, the valuations still remain at an elevated level. Underlying premises of higher valuation as far as paint companies and particularly Asian Paints is concerned is to enjoy higher amount of delta, higher amount of margin. Out here, the situation is becoming tougher because of the input cost rising in this quarter. 65% of the revenue has come in from the raw material cost which was 48-49% last year.

The kind of pressure which has started coming in probably means the margins are going to remain on a thinner side. On the other side, the growth will have to be produced as far as business is concerned. In my view point, the demand scenario is not doubted. Growth is likely to continue but the reality check is that the margins are going to remain in a tighter range and given that situation, some amount of moderation in the valuation is definitely expected.

Some amount of time and price correction both are required and at this point of time I would think that the market would wait for that to happen before buying a fresh into paints counters. After some moderation in valuation and time-wise correction, it definitely would be a better opportunity going forward.

IRCTC is a stock which dazzled everybody when it went up from Rs 3,000 to 6,500 and now it is back to Rs 4,000. What is the right value of IRCTC?
Honestly speaking, there will not be a one line answer to this particular question. The business model of the company is still evolving and evolving very smartly. On one side, they started with the railway ticketing now they are expanding their base into the other areas of ticketing including cruises and other areas. They are also getting into the hospitality business by way of becoming aggregators for providing the customers to the hospitality sector. So, they are a commission based model.

In the catering business, they again have a commission-based model becoming aggregators and most importantly developing the app which is again going into the aggregator mode. The company’s business focus remains a commission-based, asset light model that continues.

However, how fast they can expand and create a higher base for themselves will always be a challenge given that the demand side is very strong for them. So any valuation which discounts the future by at least three years in advance probably will not sustain in my view,

Another viewpoint is that if you continue to grow your book size at a rate of 30% or so, then you probably deserve the premium valuation but currently the valuation at Rs 4,000 levels also is at a reasonably elevated level. So maybe some time correction is desired in this particular counter if not price correction because there has been a sharp price correction. That would mean that a buying opportunity would be right for the company because anybody who would like to buy it today may not want to wait for three years to get his first return out of the investment that he has made. So maybe some time correction is justified at this point of time.



Source link

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments