IndiGo like HDFC Bank 8-10-year ago: Hemang Jani

Hemang Jani, Independent Market Expert, says “InterGlobe is in a position that HDFC Bank probably was in maybe 8-10 years back where people questioned the valuations but the company kept on delivering and it became one of the best wealth creation stories. Of course, what happened in the last two years is a different story, but given the positioning that InterGlobe has and the way they have managed the volatility in the crude oil price, the way they have managed to grab the international routes and the market share trend, there is a long way to go.”

Two notes have come in recently on Reliance Industries. The Goldman Sachs note is saying that the lacklustre period for the stock may be nearing an end. For Reliance, gradually green hydrogen, improvement in other businesses, in telecom tariff will happen. All of that will start coming in and the stock may cross the Rs 3,000 hump after a long time?

Hemang Jani: The company has announced strategic investments into new energy wherein they are going to set up two hydrogen hubs in India by FY26 and another electrolyser manufacturing facility which is going to come up in the second tranche. If you look at the O2C earnings, from the fourth quarter, the March quarter that we are going to see the earnings come through, it will be very robust given the sharp recovery in the GRMs.

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GRMs are currently at about $7.4 versus about $5.5 in the previous quarter. So that again is going to be a positive trigger. And telecom business, we all have seen, the ARPU is steadily growing. However, vis-a-vis Bharti, Jio is slightly lagging behind. But the fact of the matter is that they are in a very commendable position when it comes to the overall growth in earnings. So, I do think that Reliance is providing attractive entry points for investors.

Uno Minda continues to remain in focus. Just yesterday, they had a very important tie-up. The stock went up 4%. This is into EV charging infrastructure space. Now, they are investing some more in one of their subsidiaries via rights. Do you like Uno Minda or any other auto ancillary for that matter who is doing good work beyond legacy auto components into the EV side as well?

Hemang Jani: Absolutely. We have seen a good amount of action both in the auto and auto ancillary space. More so, the companies which are R&D driven, which have a focus on the e-mobility space, I think the excitement is pretty much visible. And I think Uno Minda would be one of our preferred picks because it has been a very strong R&D driven company, has been able to come out with very interesting products across the product categories.

Recently, what we are seeing is that both in India and the Eurozone, the ancillary related demand is seeing a lot of revival. So, from that perspective, you will see some positive bias for Uno Minda. Motherson Sumi is another stock that we like. Given the India specific EV opportunity, I think some of these companies will stand to benefit a lot.

A couple of brokerage notes have come in on InterGlobe Aviation as to how it has managed to dominate the Indian skies. Many have come and gone since its launch but IndiGo continues to maintain the prime market share and so does the stock. Do you a good buying opportunity at the current level?

Hemang Jani: InterGlobe is in a position that HDFC Bank probably was in maybe 8-10 years back where people questioned the valuations but the company kept on delivering and it became one of the best wealth creation stories. Of course, what happened in the last two years is a different story, but given the positioning that InterGlobe has and the way they have managed the volatility in the crude oil price, the way they have managed to grab the international routes and the market share trend, there is a long way to go.

If you look at the passenger traffic data and see how it is placed, I think it will continue to deliver a very strong growth. The only hitch or a bit of a small negative has been the selling by one of the promoters who keep selling 1% or 2%. The market is even now absorbing that so well. I think it will be a good idea to have that as a part of your core portfolio. If there is a small correction here and there because of price, I would be surely comfortable adding InterGlobe.

Some buoyancy is coming back into the pharma pack. I do not know how closely you track Wockhardt, but what do you like within pharma at this point?

Hemang Jani: It has been a little high beta company and recent investor meet where they have outlined their plans across the different drug categories is something that people are excited about. Also, there is a little bit of fundraise. So, yes, for those investors who have a slightly higher risk appetite, Wockhardt can be an interesting bet for the next one or two years.

Apart from that, pharma as a space has done reasonably well though you see a little bit of volatility in between. But we think that given the stability in the US generic pricing, India market which stands quite solid in terms of growth, we think that it would be good to have some exposure to names like Sun Pharma or Dr Reddy’s. Lupin has been a very smart performer in the last six-eight months. So, it will be good to have some exposure to pharma names. Of course, the midcap pharma companies will give you slightly better excitement in terms of growth.

How do ITC prospects look from here on, from these levels?

Hemang Jani: ITC has underperformed in the last one year and most of those negatives are now priced in. The overhang of a possible sale of stake by BAT also is now in the price. And from a fundamental perspective, there is not much of an excitement, though definitely a little bit of valuation comfort. So, I think whenever you see a little bit of volatility in the market or when the midcaps and (1:16) go through a bit of a correction I think these are stocks which will give you a little bit of stability. So, I think for somebody who is looking for a 14-15-16% kind of a return with relatively lower risk, I think ITC surely fits the bill.

In this market fall, consumer tech and fintech stocks, except for Paytm, – the new-age stocks have not corrected at all — Zomato, PolicyBazaar, Delhivery. Why is that?

Hemang Jani: There is a decent appetite. Zomato could sail through with a decent amount of blocks and there was an appetite for that and while the entire broader market midcaps were going through correction, it actually managed to bounce back and now is showing a lot of traction on the positive side. I think people do like the fact that some of these companies are market leaders in their respective fields and where the companies have started showing up in the numbers.

Look at Zomato. The way the Blinkit expansion is happening, the way the product category is being expanded, there is a lot to feel good about. So, there is a lot of appetite for the companies which are market leaders and are delivering and hence the resilience.

I want to talk to you about one section of the market which has been pretty badly hit after the Sebi nudge and has been underperforming. Look at how IIFL not only halved but fell even after that. In Piramal Enterprises, promoters are putting in Rs 2,000 crore in their housing arm but that has underperformed for a long time. Has value started emerging in any of those names, underperforming part of the pocket of the market or not yet?

Hemang Jani: Till we do not have clarity on how long this will go on, the market will not be that comfortable. Of course, at one point, people will find the value very attractive and it may give them a good entry point. But from an investor point of view, we should be focusing upon the companies where we do not have much of a regulatory issue and where we are able to see a decent amount of growth.

It is not as if those companies other than the ones where there are regulatory issues are quoting at a very high PE multiple. I will be more comfortable buying into the names where there are no regulatory issues at this point of time.

Roy Walsh

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