It has been a strong beat for on EBITDA, deleveraging has been accelerated, the consolidation debt reduction stands at a sizable Rs 10,300 crore on a sequential basis. Do you think the earnings are going to push the stock further because it has already been quite a winner?
Numbers have been pretty good and there is a beat across most of the parameters. The India business, in particular, stands out in terms of volume growth, EBITDA per tonne. The big takeaway was the significant debt reduction that the company has been able to achieve. The key focus area for the market could be how the European business shapes up because if you look at the quarterly numbers and leave aside the one-time item, even the European business was reasonably good.
So given the challenges that they may have on the UK part of the business, the market would want to watch out for how the company plans to deal with that in their overall exercise of deleveraging. But we are in a strong commodity up cycle and despite a bit of a cool off, the EBITDA per tonne and the parameters continue to remain good. Also the fact that people are underweight on commodities because of the way that dynamics work, could result in some buying interest from a tactical perspective.
What is your view on Eicher? What are you anticipating from the numbers?
It has been one of the best performing stocks in the auto space and what people are getting excited about is the fact that after the two-wheeler business being in a good shape, we are seeing early indications of revival in the CV part of the business. If both the verticals continue to do well, then there is going to be some upward revision in estimates. So from that perspective, Eicher definitely stands out because the CV cycle could last much longer given that it has taken so long to come back. It is one of our preferred picks at this point of time along with M&M and Maruti. Though the upside from current price point may not be much, but it is a stock that continues to surprise people in terms of their performances.
Let’s talk about Asian Paints or Berger Paints. Higher commodity prices is bad news for commodity consumers. Right now, commodity consumers are saying this is a great quarter for us, commodity producers are saying this is a fantastic quarter for us. How can both be happy at the same time?
What we need to understand is that on the core business, we are seeing a volume growth which we have not seen for almost about five to seven years. Just to give you a data point, in Asian Paints, the volume growth was over 30%. We have not seen this kind of volume growth for a long, long time and it is not as if this kind of growth was reported only in the festive season.
Each month, in October, November and December, the company said there is a very strong volume growth. So when this kind of revival is being reported on an item like paint, that gives a lot of confidence about the traction that is building in. Yes, the commodity prices going up would take away some part of their margins, but if there is a strong volume growth and operating leverage kicks in, then still the company can deliver very solid earnings growth and which is what the market wants to see.
I do not think we should worry too much about the prices going up because that is the trend we are seeing across metals, cement and many other commodity items. As long as we are in a good revival phase and earnings growth is showing robust growth, people would welcome that.
Post Budget, which are the three stocks where you have seen maximum transactions on the buy side at the firm you represent?
We have seen capex being the key theme that the investors want to participate in. So there has been very strong action across names like L&T, Voltas and a host of midcap companies. Even in some of the consumer companies, we are seeing very strong growth. So Havells. Crompton has not performed but people are very keen to participate.
Apart from that, out of the top banking and financial names, people want to participate in the smaller banks or NBFCs. So whether it is AU Finance Bank and to some extent, NBFCs like Shriram Transport Finance, Muthoot Finance. These are the names that people are actively participating in and there is a lot of appetite for people to get into midcap and small cap names.