“Credit growth and consumption and capex– the Cs – will lead to the fourth C which is corporate profitability. We are on a different tangent altogether. Whether the Indian market also gets in sync with the global markets and does well or corrects is a difficult question to answer but for India at least, the time seems to be good for good stock pickers and sector pickers for the next two, three years,” says Devang Mehta, Head – Equity Advisory, Centrum Wealth Management
What are you shopping for in the markets?
I am very happy that people are shopping big time and discretionary consumption is going up. I am shopping for some good stocks, some good businesses which very selfishly the people just go out and buy revenge tourism, revenge travel, revenge eating out and revenge shopping, this all will lead to good economic growth, good stock prices of course good markets.
In a lighter vein, I am shopping. Very clearly, there has been a lot of pent up demand as well as structural demand. All this is culminating into people just buying into luxury goods and discretionary consumption. A lot of these businesses have expanded their reach. Retail outlets are crowded. I am seeing credit growth and consumption on the discretionary side rising. I am seeing capex as well.
I think credit growth and consumption and capex– the Cs – will lead to the fourth C which is corporate profitability. We are on a different tangent altogether. Whether the Indian markets also get in sync with the global markets and do well or correct is a difficult question to answer but for India at least, the time seems to be good for good stock pickers and sector pickers for the next two, three years.
What is your top bet when it comes to the entire discretionary wave? Is it going to be the multiplex stocks, the mall or the QSRs?
I will throw some weight on discretionary consumption which can be food and beverages or jewellery and watches and of course, what better play than
? I am not recommending the stock; it is a portfolio stock which we hold for our clients. In fact, the trajectory has been very sharp right from Covid days when there were a lot of restrictions on the wedding. But at that time also, a lot of the budget of the great fat Indian wedding went into jewellery. All these things have also culminated into rising jewellery sales.
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I don’t want to see these stories because
Titan has diversified into a lot of other verticals right from eyewear to watches which has been the mainstay of the business as well and also into sarees via the Taneira brand. Most of this is luxury or discretionary consumption and premiumisation which is playing out in India. Titan can be a very good play with growth rates in terms of revenue and PAT and EBITDA with good ROE, ROCEs. My view is that this business will do very well.
Apart from it, not exactly discretionary but there are certain businesses that we like in the space which is something like
. This business, right from being a distributor for Pepsico and getting into even other products like Tropicana and snacks like Kurkure and Lays. Operating leveraging has come into play for this type of business and with a stellar stock price performance, a lot of investors are probably realising that the debt for this company was higher and they have deleveraged and got the ratios back on track. It seems to be a very interesting story developing going forward.
What about your views on the likes of ? There has been a 75% slump in stock price it is being pegged as one of the world’s worst largest IPOs in the decade. How would you advise investors to play the new age tech stocks? Do you see potential within select names?
We generally have avoided this space so far. There have been temptations galore over the last six, eight months when we saw a lot of these prices crashing but cash burning had never been the theme that India probably would have loved. Profits are something that the Indian market still watches out for.In the listed space, people focus on earning per share (EPS).
While the sales ratio looks exotic, how do you pay these companies the sort of exorbitant premium while they are still burning cash is something I still fail to understand. Of course, there are theories around it that after such a correction, the stock might look attractive but as I said, till there is a clear path to making profits, one should look at so many other choices available.
There are so many companies which are cash rich, so many companies where there is a negative working capital cycle, so many companies where there are ROAs above 18-20%. I am clearly not in the camp which is still going to buy the cash burning businesses.
What about your outlook on ? How would you read into the insurance stocks?
Insurance business looks very attractive post Covid. We have been playing the story since two, two and a half years. Most of the businesses have not done anything so far; they have hardly outperformed even the market. The sense one gets here is that during the Covid times, life insurance companies had a truck load of death claims and a lot of the general insurance companies like
faced a lot of mediclaims or medical insurance regarding hospitalisation.
So while revenues were rising, the top lines were rising, the bottom was either shrinking or not rising. With Covid out of the way, life is back to normal and these companies on low bases, would have good profits in the next three, four quarters. For somebody who wants to play the two, three cycle of inclusive growth of financialisation, insurance is one part of the BFSI universe which could fetch good valuation premiums going forward.
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