Bhasin also says his top pick for this year after Voda Idea is Aditya Birla Fashion & Retail Ltd (ABFRL).
What an appetite for Vodafone FPO and you have got conviction on this stock for not just now, but for a long while now and even Bharti is participating in this move.
Sanjiv Bhasin: We are truly on our way to an expiry of 22,500 which last Wednesday looked very distant. Voda Idea is no longer the ugly duckling. It has become a sparkling new swan and the infusion is going to see the AB Group companies go through the roof and now the valuation discount is actually coming up and that is why I would now give you my top pick for this year again after Voda Idea is ABFRL.
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I think we are headed for much better times. As you know, the fashion brigade is playing out to the hill. You cannot have a market cap of Rs 25,000 crore for ABFRL versus a 1.5 lakh on Trent and I think that valuation core is now being discounted. For me, the stock in the near term, in the medium term and in the longer term is going to be ABFRL after Vodafone.
What is it that you make of the private banking space right now because at the start of the year, everyone was very gung-ho about private banks making a comeback while HDFC Bank definitely has rebound from that 1360 thereabout lows, but again the numbers have failed to enthuse the street and I do not know what to expect from Axis today.
Sanjiv Bhasin: Just to come to Axis before that I will give you a point that you yourself have highlighted. After the Voda Idea FPO, Bharti Airtel picking up more stake in Indus Towers from Voda Idea can infuse more capital into the parent company; that along with the government fully backing the company, makes it a very strong entity for maybe this year and beyond and then ARPUs and other things will catch up. Voda Idea and the group companies are looking in the best shape ever and capital is now going to be the icing on the cake.
I think Axis numbers will be very strong given that the Citi acquisition has played out well and they have to do a couple of adjustments for that as one-offs. This quarter should be strong on the NIMs, and the net interest income. Rising yields and higher rates have also seen higher credit offtake and the private banks have not compromised as far as reducing their liability franchise or raising rates on the borrowing side and that has played out well. HDFC has been a standout as far as maintaining that.
It will take a couple of more quarters for it to balance out the book of the mortgage company but that is expected given that the market cap is such a big thing, it will not take time. I still think ICICI will be the star followed by Axis and my dark horse player is IDFC First Bank. Watch out for the results over there. They could be very strong. Another one of my small picks has been DCB Bank. There is a big dividend coming along with capital infusion by the promoters. These three-four stocks could be good performers from here. You rightly pointed out that PSUs have taken the cake as far as stock outperformance is concerned, but now it merits to look at largecap private banks where results will be key going forward.The latest ET report indicates that Bharti Airtel is in talks to buy Vodafone’s 21% stake in Indus Towers and they may get a controlling interest as well.
Sanjiv Bhasin: As a disclosure that 210 was somewhere where we put out a big buy report on Indus based on the quarterly results, based on their provisioning which they had done for Vodafone and where the writeback came because any process of raising funds for Vodafone was a win-win for Indus Towers. I still think it is an excellent model which has played out on a market cap of 99,000. They have Rs 11,000-12,000 crore in cash. This company was very cheap at those prices. Yes, now with Bharti taking stake, it will be a win-win for both.
I think Bharti will consolidate and become the largest shareholder. It gives it more power by holding the largest network of towers. Secondly, Vodafone PLC can now actually put that money into Vodafone given that they have been able to get a super response. So, in the end.. it is a win-win for both. The pricing will be a little bit difficult because Indus Towers has been a star outperformer. We think that this stock can be a very-very big play given the change of constituents and then one person getting full control will be even more value added to that. But in all, I would say it is a win-win for Voda Idea and the group companies of AB Birla.
What is the outlook when it comes to Cipla, pretty positive brokerage view, they have got Investec maintaining a buy and they believe that there is a possibility of upgrades down the line for FY25-26. Cipla and if we had to extend it to some of the other pharma majors?
Sanjiv Bhasin: Lupin, Dr Reddy’s, Cipla have been our top picks and Cipla, purely people missed what is the action of Seroflo as far as Europe goes. Their brand over there has taken off like how and I think they are gaining more and more market share because that is where the brand value has really encashed and the sum of parts is arguably at a cheaper valuation than most of the other largecaps.
We continue to think the decline should be a buy, but the actual buy was when it came to 950 for a couple of observations by the FDA and that is when it was a real screaming buy below 1000. The stock has been a very steady performer. I do not rule out Rs 1500 coming in this, but yes, it is a core portfolio stock. But our top pick continues to be Lupin which we think can give you 50% upside and Dr Reddy’s is the second in line with Cipla being the third.
Is it turning out to be that curvature moment for the AB group like we saw for the Tata Group just coming out of Covid when N Chandra took over. at the Tata Group? From the March 19 lows. Century Textiles is up 37%, AB Capital has given a 28% return, AB Fashions is up 28%, Hindalco up 15%, Grasim, UltraTech have all given decent returns, maybe not as much UltraTech but for erstwhile only commodity conglomerate they have expanded quite a fair bit and very positive news flow as well of late of value unlocking clearly.
Sanjiv Bhasin: Correct and I am fully with you on your assessment. This is the unlocking for Aditya Birla Capital which was supposed to be a pure cement and aluminium play on the largest market share and as far as UltraTech, Grasim. Look at how AB Capital has come back, look at ABFR. Just see the market discount of Rs 25,000 crore market cap on brands like Allen Solly, Louis Philippe, Pantaloon, Peter England, American Eagle, you name it and it is there and you have a Trent on the other side.
Given the pedigree of the Tatas, at a Rs 25,000 crore market cap, ABFRL is at a vast discount. Given that this capital infusion is going to put more and more strength in the business, their marketing, and they have already done a couple of good acquisitions. ABFRL is my stock for the year after Vodafone and as a disclosure, we own both of those.
We think these are going to be the stocks to watch out for because the businesses are unique and the advent of aspiration to rise from the small tier to the next tier as far as apparel has no comparison. Apparel is also like a personal choice and ABFRL caters to all types of needs from the lower end to the higher end in the brands which they have.
This stock is ready to Rs 350 and maybe more over this year. I definitely think you should be invested in this. As a disclosure, both of these and AB Capital are three of the stocks. You should also watch out for ABSL AMC, that hit a 52-week high yesterday.