SBI a value play, buy Page Industries on dips: Rahul Shah, MOFSL

The economy is bottoming out and rural consumption is definitely growing. Plus, this quarter’s numbers have been fairly decent. I do not think there could be any more pain here for the auto sector in coming month, says Rahul Shah, Vice President, Broking & Distribution - Motilal Oswal Financial Services.

On the back of the Supreme Court hearing on AGR, the pressure on the telecom companies are increasing. This is coming at a time when in names like Bharti Airtel we are still seeing a lot of investor interest post the fundraise. Does your view change post the Supreme Court hearing?
The AGR issue has been going on for a couple of months now and one thing is very clear that for telecom players like Bharti and Reliance, there could be some market share gain as well. We are seeing that trend in these stocks and in their price performance as well. The way guidance has been given by both the companies and especially Bharti, it seems the ARPU of 110 will obviously go higher in the next two years. My view is post that, Bharti as well as Reliance have outperformed. There is a lot of steam in both the stocks. One can still consider investing in them.

Companies like Alkem, Divi’s and Ipca have done quite well. I think this segment will continue to do well and the domestic play will continue to do well.
-Rahul Shah

The one angle of course is telecom but the other one is banks which have exposure to these companies which are now up for AGR payment in March. What happens to the likes of SBI, BOB or for that matter, some of the private banking names like Axis? Would you say the stock prices have already absorbed this shock?
We have been hearing about AGR hearings since the last three-four months and one thing is very clear that it has been factored into the prices of the stocks that a few companies have to take a hit and there could be some payment as well. I do not anticipate any fresh pressure post Supreme Court hearing.

What is your view on autos? Will we see things bottoming out or is there a lot more pain?
There are two-three things. One, the economy is bottoming out and rural consumption is definitely coming in. Secondly, this quarter’s numbers have been fairly decent. I do not think there could be any more pain here for the auto in coming months. One should look at the two-wheeler players as well as passenger vehicles as both look attractive. In that space, we are bullish on Bajaj Auto and Maruti.

What is your outlook on some of the financials, insurance names? Is it a good time for investors who have missed the bus with these names, to enter now?
The stocks have done quite well in the last one year and I feel they will continue to do well. Any correction in the stocks should be taken as an opportunity to buy them. This sector will continue to be expensive. That’s what happens when you get into a high growth sector or the sector which keeps on doing well and the stocks have been re-rated multiple times. My view is stocks like HDFC Life, ICICI Pru, SBI Life all three largecap plays look quite interesting in terms of insurance play.

There has been a buzz in some of the pharma names and even in the midcap pharma pack. What is looking good within this segment?
The pharma largecaps have underperformed in a big way and the companies with domestic exposures have done quite well. Companies like Alkem, Divi’s and Ipca have done quite well. I think this segment will continue to do well and the domestic play will continue to do well. But there is still some pain in companies like Sun or Lupin which might take some more time to catch up with the performance.

What about SBI? It is down about 2-2.5%. How are things shaping up?
I feel that the entire set of corporate banks have done quite well barring SBI. My view is the way the NPA cycle has peaked out and if you look at this quarter’s results and the commentary from the management, it looks like risk to reward could be quite favourable from here. It is a good valuation play and the NPA cycle and most important, the asset quality is improving and the subsidiaries are getting listed. I think we will see SBI Cards on the block and maybe an AMC later on. So there is a lot of value at this current price and a lot of money to be made and very little risk on that.

What is your opinion, we know how big a compounder, Page has been over the last few years. The management in their interview with us this morning indicated that this is just a temporary blip. Do you think the dip in the stock price should be bought into?
If you look at the consumer FMCG and consumer sector, we have seen defensives doing quite well in the last one, one and a half month. PE has kept on going higher and higher wherever we are seeing the visibility of earnings. The same thing is with Page as well. It has been a compounder as you rightly pointed out. This could be a one-off quarter where we have seen a little bit shrinkage in the margins but going forward, the at way the management has commented, I feel any selloff in the stock should be looked as an opportunity for a longer term play.