Chakri Lokapriya, Managing Partner, RSB LLP, says Mankind Pharma has done very well over the last one year and it has continued to execute on its business franchise as well because its consumer folio is very strong, its institutional business is developing and the margins are improving because of the consumer business, which is holding on. Against this backdrop, some market share increases have been evident. While the stock has doubled, I would continue to hold on to Mankind Pharma because the business operating measures momentum is still firing on all cylinders.
It is not only the fifth consecutive strong quarter, but also a beat by Lupin. Do you think further re-rating from here on is possible in Lupin or bulk of the good news is already in the price?
Chakri Lokapriya: We have looked at basically the numbers and the business momentum seems to be pretty much intact and it looks like the beat can continue to happen for at least the next couple of quarters. Of course, in anticipation, the estimates will move up but that is good news because as the estimates move up, the valuation will be on its side. So the Lupin franchise looks good at the current levels.
Where do you see the case that one should take, probably look at trimming positions and book profit? Is it real estate? Do you think the peak is behind us because earnings from a couple of those companies were not the most impressive?
Chakri Lokapriya: Earnings were not that great in some of the companies but the unsold inventory of various real estate companies is coming down. Still the overall inventory stands somewhere close to about one and a half, two years. I am talking about national averages. For individual companies, obviously it is different.
Against this backdrop, as interest rates peak and the US starts cutting rates, India will also do so. Most of the rates, home loan rates in India are on floating rate and that means the cost of borrowing almost immediately comes down. That will provide a further fillip to real estate demand. So, we should continue to hold on to real estate stocks and not trim positions yet.
When the Mankind Pharma IPO came at around Rs 900, everybody called it expensive and the India growth part is well documented in the last four quarters and the stock has doubled. Even now I hear that the book was seeing a lot of interest from funds. Would you buy at the current level of Rs 2,100 or would you sell if you have participated in the last one year gains?
Chakri Lokapriya: Mankind Pharma has done very well over the last one year and it has continued to execute on its business franchise as well because its consumer folio is very strong, its institutional business is developing and the margins are improving because of the consumer business, which is holding on.
Against this backdrop, some market share increases have been evident. While the stock has doubled, I would continue to hold on to Mankind Pharma because the business operating measures momentum is still firing on all cylinders.
Have you had a view on Catholic Syrian or even DCB for that matter, where the Aga Khan Group wants to raise their stake and have sought RBI permission? These two are not banks that are very often discussed.
Chakri Lokapriya: Indeed, I do not have a real firm view on either of the banks, but the Catholic Syrian Bank management has changed. Second, it has been a topic of speculation in the past whether it would change hands. Now, that speculation has kind of died down. The overall business outlook in the part of the region where it operates is kind of recovering. The growth rates are still lower versus other parts of the country. Other than that, I do not have a firm handle on either of these two banks.
What is your view on Zomato?
Chakri Lokapriya: Zomato will show a continued trend towards trying to improve its profitability. The focus here is on margin and maybe it is not a fair thing to ask of this company given its growth path, but the focus will be on margins if it can show some kind of improvement. On the face of an overall weak consumer, that will kind of still weigh on the stock.
Did you catch the commentary coming in and also the results? After yesterday’s big move too, V-Mart is gaining 1% today.
Chakri Lokapriya: Indeed, V-Mart is strategically well positioned in the tier-2, tier-3, tier-4 towns, where it is expanding market share. These towns do not have organized retail like V-Mart and it does a good job. Their acquisitions held them back a little bit. Now, if you look at recent spending growth by the consumer, the Indian consumer, you have seen credit on the smaller items, smaller ticket items, increasing rather than the big ticket items. That is good news for V-Mart. Therefore, clearly, I would look to start buying into the stock because it is on the mend. You would not look for pricing power but you would look for volume increase.
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