Ishaan’s Longterm Portfolio

PORTFOLIO UPDATE!!

1] SBI CARDS
The results came in yesterday. Cannot say they were exactly what I expected but Y-o-Y growth is very robust due to the low base effect. The revenue numbers were good Q-o-Q and Y-o-Y but profit numbers fail to impress. The PAT margins were affected due rising interest costs but I believe we might see the peak levels soon. Even the management expects the majority of the damage coming from Q3. Now no one knows how bad it is going to be. So instead of focusing on such short term phenomenon, I looked for card growth and market share which is improving or remaining constant. The management expects 0.3 million card issuances every month. An ambitious but achievable target. Still the TTM profits are higher than that of last year from 1600cr to 2100cr. Considering 520cr Average quarterly profit for this year, the estimated profit comes at 2160cr. Valuing it at 40PE, the price comes at 920rs per share. At current price of 805 it is good buy according to my thesis.

Now it is in a bit of corrective mode, so buying it right now won’t be wise. I will wait for some correction and consolidation to average my position.

2] TATA POWER
The company reported highest every quarterly profit in a time when electricity demand is subdued due to the monsoons. Strong deal wins in EPC projects and Solar Rooftop segment is helping the company to stay 2 steps ahead of its peers. They are not just dependent on the power generation business, though it is a major part of their earnings we can see incremental growth form all other verticals.
In their presentation they have mentioned 37% of almost 14GW capacity is renewable. Almost 1.4GW of renewable energy plants are still in pipeline. This will take the renewable portfolio to >40%.
An interesting aspect of renewable energy capacity is that the cost of generating electricity is very low. With increasing share of green energy, the company will save more on fuel cost.
Coming to the charging infrastructure being built by Tata Power, more than 450 stations along national highways and special infrastructure for buses. This is a very small and it might not be even profitable for the company as of now but going forward, we can see more and more partnerships with major car manufacturers for providing home charging solutions and with governments too. This can be a good growth engine if monetized properly.
Currently it is trading at 28PE and I think it rightly valued given the huge upmove it gave last year. The good thing is the move has been sustained foe quite a while and we are seeing a good base pattern being formed. Both institutional investors have trimmed their stale owing to valuation risk since last year but I believe at current valuations if the company performs consistently we can see buying resume in this stock.