Sun Pharma Ltd – massive opportunity ahead:
Mega trends are there all across the board, but as far as the stock market is concerned, you can make money out of say, retail shopping and even pharma. The global generics industry is moving from Europe and America to India. The move is still on and it is a big thing.
We are just about $10-12 billion probably at this point in time and it could be a $100-billion story. So there is a lot of story ahead and may be Sun Pharma is a leader. But there are many more Sun in the making, they could be a Rs 300-crore-500 crore company. So you have to spot those new entrepreneurs who are going to come up in that particular field.
So there is a massive opportunity and there are lot of markets like European and Japanese markets, and we have not even started. Even in America, lot of segments are not being tackled, so the opportunity to penetrate these market segments is huge.
United Spirits – great business, monopolistic, strong brands, pricing power:
We have a large population and drinking habits are very hard here among the people who can afford and yet the consumption levels are very low. Even though the unorganised market is very big, in the organised branded liquor market there is one major player and that is USL.
India is probably world’s biggest brown spirits market and in that Diageo is the king, so we have a competitive situation where opportunity size is very large and players are only two. It is almost monopolistic as monopolistic as Bosch or something and it is very branded thing.
United Spirits is all the makings of a great business. It has a great business opportunity, because competitive situation is quite crazy. You cannot enter the market that easily, you cannot create a Black Label or Red Label overnight, it requires a lot restriction in terms of advertising and doing business.
They have the distribution and they have all the brands and the global technology to milk the customer. They will make you pay almost double in next 5-10 years as they have the pricing power.
Ajanta Pharma – Good business, good management, good growth, expensive but still a value pick:
Ajanta Pharma is like a dark horse. This company is known to everybody. It is into domestic branded generics as well as exports to unregulated markets. Now, they are planning to venture in to regulated markets.
They have grown fantastic, you can go see their numbers and guys are good. Business is good, management is good, growth is there, when I bought it, it was reasonably priced, today it is little expensive but still a good value pick.
Reliance Industries – largest value migration story:
The entire fuel retailing is a monopolistic industry and in that sense BPCL, HPCL, IOC are key players. But Reliance is making a mark, so value migration will happen. One of the biggest value migration in the making is Reliance getting into petrol, diesel retailing in a big way.
Dynamics will change, it will be competitive to the rest of the three and Reliance has the biggest opportunity to Rs 1 lakh- 3 lakh crore worth of business because they are the refinery.
Reliance Industries is going to be one of the largest value migration story that we will watch in next five-six years. If government does not disturb the promise of decontrol. I am quite sure that they will make it very big and very profitable so that is about Reliance.
Reliance has the largest business in India and they do have not any risk of. This stock could be available at 5-6 PE multiple, very large, and competition of course building up.
HDFC Bank – scores well on values of business, management, growth & longevity of growth:
HDFC Bank is available at three-and-a-half times-four times book. But PE multiple is only 21-22. While picking stocks one must look at PE ratio apart from growth.
If we look at price to book, this does not reflect the longevity of growth. This is not a growth ratio, you have to look at growth parameters and growth ratio is best picked up by PE multiple, not so much by price to book.
HDFC Bank it is always traded at a premium because growth has been solid and market share gain has been robust. Investors often do valuation without looking at values and the process of looking at values is business, management, growth, longevity of growth.
When you have circled all four, then you have understanding of what is the value and let us go and look at the quotation, but investors start with the quotation and then look at the value, that is where the problem comes.