Top Four Pharma stock picks
One has to be very stock specific in the Pharma space. One cannot say that generic Pharma per se is doing well. Only the domestic Pharma space is doing well and there are very few companies which are only domestic.
Alembic is one basically which is a purely domestic large cap Pharma stock.
Torrent Pharma is doing well domestically as well as in the US.
Natco is in news once again and it is going to be positive for them.
If Pharma has to do well, Sun Pharma is the best placed company both in terms of strategy as well as the large market share that it has.
Welspun India buy recommendation was premature
The Welspun India recommendation was a one-off. Let us get some more information basically because the company is also internally auditing its lapses. Our underlying thesis remains that since this company has scaled up pretty well, we believe that there may be short term challenges as far as their process is concerned, but given the fact that it is a Rs 10,000 crore company, I believe they will get their processes right.
The note said buy on the basis that there is a lot more going for the company, so you keep your conviction.
That is essentially what we are saying. Anyway, nobody has got a chance to sell after the news has come. So the stock just kept on falling. From Rs 100 if we had a buy, so 40% lower than what that price was. We continue to maintain a buy on that.
The jury is still out as far as what has really happened. We have not got much information. I have just been talking about what it was historically. Now if there is one client who has gone out, we need to wait for more information on their reaction. I am just reacting to what the management said on the call and to that extent they said that there was a process failure and we will set the process right. If that is the only thing, then I think you are right basically that this is a temporary setback.
Microfinance sector will grow at 20-25% CAGR
At least for the next couple of years, the entire microfinance space is going to be doing well. The MFI space itself is as large as anywhere between five to six lakh crores and currently the industry size is close to around 2.5 lakh crores. So growth of another 20-25%, 30% kind of a thing for the next two years looks very much possible. Some of these companies will have challenges who have taken the small banking licences and because they would be more involved in setting up the infrastructure and setting up the banking, they might not be able to do the same kind of growth but others more or less should be in line with this kind of growth.
Neutral On InfoTech stocks
There are challenges as far as IT is concerned. Growth challenges continue to be there. Brexit impact nobody has still been able to define and if you look at any of these companies calls on the last quarter, nobody has been able to really put their arms around that what is the impact of Brexit is going to be and given this kind of challenge, we are at best neutral on the sector.
Blue Chip Dark Horse stock
Engineers India Limited came out with results. Among all the three-four oil marketing companies together and including ONGC also, though it is not an oil marketing company but all the four oil companies in the country basically a talking of around 45 million to 50 million addition in terms of refining capacity.
For a million tonne, you need to spend Rs 2500 crore of capex. So, you are talking of close to around Rs 1.5 lakh crore to Rs 2 lakh crore of capex being done in the next five years. EIL is a company which is going to get majority of the orders because EIL is a PSU and besides being a PSU, it is one of the best and the lowest cost producer for these kind of projects. So I think EIL is a dark horse out there. Earlier, it had given guidance that it will be taking orders of only Rs 2000 crore for the full year. That Rs 2000 crore order came in the first quarter itself. So that is dark horse basically for the market. The earnings and everything has actually been falling for the last four years because there was hardly any capex but given that the cash flows are very strong for the oil marketing companies, this is the company to watch out for in the next two years.
It is like in smaller NBCC which was doing a lot of capex on behalf of the government.