Get into consumer stocks; 2 stocks to buy as metals in a very sweet spot: Sanjiv Bhasin

Sanjiv Bhasin, Director, IIFL Securities, says “it is time to book out of those consensus trades of outperformance on PSUs and so on. You should be in consumption stocks because they are looking very good as far as the earnings go. As a disclosure, both Voltas and Havells are in our portfolio and now you weathered the worst of the winter. We think the real income is going to be generated now from the tier II, tier III, and the smaller rural class, that is where we are seeing unprecedented growth. There are no coolers now.”

Bhasin also says “metals are in a very sweet spot. Vedanta and JSW are two stocks we are betting on.”

Some of the consumer appliances companies, air-conditioner companies have had a very rough patch in the last few months. Voltas, Blue Star have come back. I would like to just bring to your notice a commentary coming in from one of the leading players last evening, which is Godrej Appliances. Yesterday, they said they are expecting 20% growth in the appliances business, including air-conditioners, refrigerators, etc, going into summer. If Godrej has visibility of 20% in appliances, it will surely rub off on the entire sector. Anything which you like there and what is your take on this commentary?
Sanjiv Bhasin: I have been stating that this is the time to be in consumer goods, whether white goods, staples, or even discretionary. Discretionary has outperformed as you are aware of two-wheeler and four-wheeler, but staples have hardly performed. So, we have been upbeat on Bata, Patanjali. We also own both Havells and Voltas and we think that the real income which is going to be generated now is from the tier II, tier III, and the smaller rural class, that is where you are seeing unprecedented growth. There are no coolers now.

Everyone has moved on to the AC market. And with the advent of lower inflation, lower rates, I think rural India is going to be the one where money is going to be made. So, it is time to book out of those consensus trades of outperformance on PSUs and so on. You should be in consumption stocks because they are looking very good as far as the earnings go. As a disclosure, both Voltas and Havells are in our portfolio and now you weathered the worst of the winter. If you are looking forward to the next six months, anticipation of that sale starts from now. The Godrej commentary is a very big positive from one of the big players in this industry.

Any thoughts on these two, Indostar and IB Housing?
Sanjiv Bhasin: We put our money in IB Housing at Rs 115, 120 when there was no promoter over there with more than 1% holding. Only institutions owned it and it was available almost for free and pessimism was at its highest as the old owners, Banga and the rest of them, had all exited. That was a time you should have been in this stock because the valuation comfort was at 0.4, 0.3 times price to book. Now, all those have made a comeback because NBFC has actually upped the ante and like you pointed out, the industry average is at 1.5, 1.7.

The risk to reward was very favourable and now there is a transition with a new name and new promoters. We did invest, but we have booked out of that. We are now invested in Indiabulls Real Estate, where Embassy’s takeover and the merger is just on the anvil. NCLT will give it by the middle of March and that could be a game changer.

You can imagine what Rs 6,000 crore market cap means for one of the largest marquee builder of property in both Maharashtra and Delhi and I think that Indiabulls Real Estate can be a big game changer here. It also trades at a market cap closer to Rs 5,000, 6,000 crore against even defaulters like Unitech and Parsvnath which have Rs 4,000-5,000 crore market cap. So, risk-reward is very favourable there. Indiabulls Housing Finance is going to be a game changer because of the new structure and over a period of time, it will deliver very good results. A disclosure, Indiabulls Real Estate is where we are very-very bullish.

What is happening to the overall airport economy? Today as well Motilal Oswal has initiated coverage on DreamFolks and they are suggesting a target price which is almost 30% to 35% higher than the current market price. Do you think that the entire aviation, hospitality sector, DreamFolks, GMR Airports, have further room on the upside?
Sanjiv Bhasin: I used to stick my neck out because I travel so much pan-India that at 35, I used to say on TV khade honi ki jagha nahi hai airport pe, kaise GMR 35 rupaiya hai?( There’s no place to stand in the airport and GMR share price is Rs 35?). And lo and behold, look at the unlocking of the value. Aerocity is doing rocking business as far as the hotel business goes. They are selling more Black Label than ever. When luxury turns into necessity, then there is no stopping barrier for the expansion on the upside. Go to any airport, in the Bombay Airport Terminal 2, there is a one hour waiting list just to get through.

So, I think this is there to stay. You have to catch on to the right themes which you want to play. I will also take a word, you were mentioning on Vedanta, yesterday I was there at their presentation. The presentation was superb as far as both the non-ferrous and ferrous side.

People are not aware, but in India the largest nickel producer and the only nickel producer is Vedanta. From BALCO, there is aluminium, there is zinc from Hindustan Zinc. You name the product on the non-ferrous side, it is there. Aside from that, there is thermal power, there is gas, and there is energy. So, sum of the parts, the management has clearly indicated that they are not going to raise anything on the company as far as debt goes, they are only going to reduce that.

If there is going to be value unlocking as per the plan and if you gave even 50% of that, then the valuation of the stock is so cheap that at Rs 99,000 crore market cap, this can even double and still look cheap. All we need is execution and going ahead on the promise which they have made in the presentation yesterday. As a disclosure, Vedanta is also under our coverage. We think metals are in a very sweet spot. Vedanta and JSW are two stocks we are betting on.

This morning, Mr Khara of SBI spoke to our colleagues that capacity utilisation across industries is now hitting the 75% mark or thereabout, that is exactly the level from which on green shoots of actual capex enquiries start coming in. He was very confident of 14% to 15% credit growth. SBI was the last mover in banks but has done pretty well. Would you latch on to SBI or some of the big PSU banks like BOB, Can Bank?
Sanjiv Bhasin: We had all of them, PNB, Can Bank, SBI, Bank of Baroda, part of it in our portfolio, part we booked. But we are more bullish on the private banks, the comfort of earnings, the comfort of CASA ratio and the credit expansion. The liability franchise is just a matter. So, HDFC, Axis, ICICI are our top holdings now and we continue to do SIPs on those. I will go by Mr Khara's word, but SBI has already made a first mover to 750, whereas HDFC and ICICI, Axis are now rearing to go.

I would say private banks will lead the Bank Nifty and I would be more overweight on the private banks. Also, I wish you well in your journey on the voyage on the ship. As a disclosure, ABSL AMC has been under my coverage on your channel from 350-400. Yesterday, it hit a high of 529. Do not sell it till it hits 750, that is my advice to investors.


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