Jani also says he would stay away from Tata Motors and if he has to bet, he would go with M&M which looks to be a much better, cleaner bet at this point of time.
This has been a year of consolidation for the cement sector. At the end of 2024, there are fewer players than there were at the start of 2024. But the issue is that a lot of other segments also have not played well with the cement sector, especially on the pricing front.
Hemang Jani: The sector has been going through a slowdown and despite the consolidation with two major players commanding about 75-80% of the capacity, when you look at the operating performance it has not been the best that one can really expect, but there is a sense that following a pickup in infra and the government spending and the rural side recovery, we might see good growth coming back. Prices have started inching up, particularly in the north, west and eastern side. In the Southern market, there is still not much clarity. So, from a risk-reward point of view, from a purely next three or four quarters’ profitability point of view, the sector looks attractive and it would make sense to go with either some of the largecap names like UltraTech or some of the regional players like Dalmia Bharat or JK Lakshmi.
Tata Motor was a high flyer. Tata Motor now is in reverse gear. Why is this happening? It was always a play on JLR and EV. It was always a play that sooner than later, Tata Motor will be split into different entities, CV and EV. If those factors are at play, then why has the stock gone down from Rs 1,200 to Rs 700?
Hemang Jani: Tata Motors has been a tricky stock to track given the kind of presence that they have in key markets and the dynamics in China, Europe, US, and the rest of the world could be very different. The overall outlook in the last two concalls has been muted because whether it is EV or the normal engines, there is a bit of a slowdown across many parts of the world.
In India also, the CV cycle is not looking that good, and even on the passenger vehicle side, Tata Motor has been struggling. So, given the issues and the news flow around us, clearly the stock which did so well is going through a bit of a correction. I am not too excited by the EV play per se as far as global markets are concerned. Yes, in India, maybe there could be some excitement, but people would prefer pure play EV companies rather than going for a hodgepodge like Tata Motors. So, I would stay away from Tata Motors at this point. If I have to bet, I would go with M&M which looks to be a much better, cleaner bet at this point of time.What is your take on the pharma sector? Yesterday, it was doing very well. Of course, hopefully defensives will hold up today as well. Nomura has upgraded Dr Reddy’s to buy. They are saying that the relative underperformance of the stock suggests that the concerns about the high contribution of the Revlimid are priced in. They have reduced the target price a bit, but overall, the rating on the stock has increased to a buy versus neutral. What are your top recommendations within pharma?
Hemang Jani: Clearly CDMO is out of flavour because of the delays and the kind of news flow that we had. So, we are trying to avoid that space. But within the generic play, Sun Pharma and Cipla both appear quite attractive. Even Lupin has got approval this morning with a certain exclusivity of 180 days. I do not exactly know the size of the opportunity. These companies are looking quite stable. The price erosion in the US has stabilised and the speciality product portfolio of Sun Pharma has started doing pretty well. So, some of these companies would provide a good stable earnings growth – 14-16% – over the next couple of years.
What is your take on real estate space? How is that one looking? It has seen a very good run over the last two to three years. Post COVID, realty has been one of the favoured picks, even if we talk about the asset class way or even in the equity markets when you are selecting the sector. Do you think in 2025, it will be able to live up to the expectations?
Hemang Jani: I am not too sure about 6 months or 12 months. But if you look at the next three months or so, and particularly this quarterly earnings, definitely the sector looks good. If you look at prominent players, be it DLF or Lodha or some of the regional players also, including this Brigade, Prestige, the overall data point in terms of new sales has been quite good and we do think that balance sheet wise these companies are better placed.
My only concern is that the stocks have run up quite a lot. And once you see a bit of a lull in terms of the new project launches or the sales that they are doing, the market could react a bit negatively because it is a high beta sector. So, yes, momentum play, quarterly numbers play, I would be positive on some of these names like Lodha and DLF, but I am not comfortable buying into it from an investment perspective given the stretch in the valuations.
