Deven Choksey, MD, DRChoksey FinServ Pvt. Ltd, says he remains reasonably optimistic about the possibilities for Tata Motors. M&M is a different story altogether. All the new vehicles which they are booking, are for about one-and-a-half to two years of delivery schedule and that is amazing. As for Ola Electric, till they have a vision for profitability, he won’t be in a hurry to buy this particular company.
The auto sector is going to be in focus today. There is focus on Tata Motors on account of the weak JLR sales; M&M has been upgraded by CLSA with a target price above Rs 3400; Ola Electric is under the scanner of the Consumer Affairs Authorities on account of mounting complaints against the company and the service they have been providing. What is your view?
Deven Choksey: Well, Tata Motors certainly, the passenger vehicle segment including the domestic portfolio as well as the JLR portfolio, on a month-on-month basis, is not a great number to talk about. But on the other hand, one is finding opportunity in the commercial vehicle segment.
The Commercial vehicles segment, structurally, is showing a good amount of growth going forward as well. The possibility of the lower interest cost is going to influence and work better for the auto companies in general, in companies like Tata Motors in particular. Despite lower numbers in September for passenger vehicles, the footfall has been extremely high in the showrooms, which is indicating that in subsequent months, that is the October-December quarter, we are likely to see the reversal of the downtrend in the passenger vehicle segment, particularly large volume plays like Tata Motors.
We remain reasonably conscious, but at the same time optimistic about the possibilities for Tata Motors. M&M is a different story altogether. All the new vehicles which they are booking, are for about one-and-a-half to two years of delivery schedule and that is amazing because up till now, whatever the new vehicle booking that they have done, they have had a phenomenal run on them and the new one which they have recently launched is also going in that direction. We like M&M from that perspective. It is providing sustainability in the earning outputs.
What is your outlook on Nykaa? They came out with their updates and brokerages believe that there has been pretty strong growth in the beauty segment. Fashion has been a bit similar to Q1, but there could be a gradual recovery kicking in in the second half.
Deven Choksey: Most of the beauty segment players, including the major retailers like Reliance are registering a significantly large amount of footfalls into their showrooms as well. So, from a perspective of looking at the numbers, they should be remaining reasonably positive. Do not know immediately how exactly it will have the impact on the bottom line or the margin, but one would like to believe that given the kind of demand trend that they are experiencing in both the digital format as well as in the physical format of shows, they should be reasonably good on the top line front performance. One will have to wait and see how they fare on the bottom line.
Do you also recommend keeping any bias towards IT on the positive side in this market?
Deven Choksey: Yes, we have been positive about IT and the prospect and largely more of a structural change which we are seeing in the IT space largely because of the shift has significantly happened from coding to computing and over there the use of technology blocks, if I use cases, the toolkits, I guess the Indian IT companies are providing the platform-based solutions. So, from that perspective, we remain extremely comfortable about the prospects therein. At the same time, engineering R&D business within IT is giving a good amount of outlook as far as the next two to three years of order book position is concerned. So, there too we remain reasonably confident about.
In the near term, the stock prices are factoring in most of the positives. I am not too sure whether the stock will go up in a hurry. Maybe if the market starts stabilising, you will see a relatively better outlook on the stock price earnings. Fundamentals, as I said, remain distinctly positive about the outlook of the companies.
Would you look at Ola as one of these opportunities where the company can resurrect itself and the stock could be a buy perhaps at 90 odd or if it falls further?
Deven Choksey: In my understanding, till we start seeing the vision for profitability of the company, I do not think that I am in a hurry to buy this particular company. As of now, at the current market price at which they are quoting, they are probably losing somewhere around Rs 24,000-25,000 per vehicle and that is what I think my take will be that unless we see a change in that particular equation, wherein they start bringing down the loss, they start probably registering some amount of profit, then it is worth buying into this particular stock in the portfolio. Otherwise, till that point of time, wait a while before you enter into the company.
