Stocks

eicher: Maruti Suzuki and Eicher Motors may continue to do well, says Rahul Shah. Here’s why

“We should not forget that and have been underperformers in the last two years. Post Covid, most of the stocks from their lows are at least 50% plus on higher returns. Auto specifically had underperformed and both Eicher and Maruti have underperformed. Maruti’s blockbuster numbers make it look like they have the highest market share in the segment they are into. Going forward, they will get into full fledged EV mode in a couple of years or so,” says Rahul Shah, VP-Equity Advisory, .

There seems to be a renewed vigour in names like Eicher and Maruti. Is there any specific reason they are doing well? They have had margin issues in the past?
I think demand in India in terms of discretionary spending is looking very strong. The month-on-month sales numbers of four-wheelers and two-wheelers has been very strong. Maruti’s results were pretty strong after a couple of quarters. I think the kind of product pipeline that they have and the product mix that they have and the way they are planning, it looks like both the stocks should do well.

Also, we should not forget that Eicher and Maruti have been underperformers in the last two years. Post Covid, most of the stocks from their lows are at least 50% plus on higher returns. Auto specifically had underperformed and both Eicher and Maruti have underperformed. I think Maruti’s blockbuster numbers make it look like they have the highest market share in the segment they are into.

Going forward, they will get into full fledged EV mode in a couple of years or so. Then we will see a lot of market share coming into this segment from this space as well. So Maruti looks very promising in that perspective.

Now coming to Eicher, the spending and the sales numbers are what people are looking at. Secondly, I think if we look for where in the auto space we see the highest recovery in terms of earnings for the next year or so, what analysts are expecting, one of them is Eicher. So I feel that both Maruti and Eicher look interesting from here as well.

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Do you think that the worst in could be behind us?
All the businesses of the new age tech business are not getting any valuation in terms of the way they have done it in the last few months. I would still give a pass for all these new tech companies as of now. I do not think in the near term these companies will perform. One thing is very clear historically; whenever Nasdaq has underperformed and whenever it has fallen, I do not think tech companies have outperformed. So I would avoid all these companies at this juncture.

What is the criteria which you would put into use for judging a company like Nykaa? They make a lot of cash and they are a cash flow positive company. Would you keep Nykaa in a different bracket and not compare it with others?
I think what you are saying is right. I would put it in a different bracket but we feel that it is very clear that in the next couple of quarters, I do not think investors are interested in any of the new fintech companies and when they are battered and everybody underperforms. It is no point using the brain at this point of time just to build it up. A couple of quarters later. We will see how things come up and how the overall fintech evolves in the next couple of quarters and then we will take a call. As of now, I would avoid all of them.

Let us do a like-to-like comparison; is growing at 23-24%. If I compare that with or , those banks have a smaller base and yet are struggling to grow at 20%. At the current juncture, do you think HDFC Bank is getting unnecessary booed because of its merger concerns?
Absolutely right. If you look at the last 15 -20 years, HDFC Bank has never come into any bad phases of the earning cycle vis-à-vis the sector. If the sector has done badly, then also the stock has outperformed. I think this is a temporary phase for HDFC Bank. People are talking about the mergers and headwinds and are worried how it will play off.

So my sense is HDFC Bank is the top performer in terms of the balance sheet. One should definitely look at HDFC Bank. The entire Bank Nifty is close to an all-time high and HDFC Bank is still struggling. If one looks at risk versus reward, then picking HDFC Bank from here is a no brainer.

was supposed to underperform this year because of challenges related to 5G rollout. But it is outperforming. What is the right way of looking at Bharti’s concerns?
Obviously 5G is a major concern. Historically we have seen at times of new launches in terms of upgradation of technology, ARPUs have fallen in near term and then it has moved up. So the near term challenge remains only for the launch of 5G and including the services.

Looking at the last two or three years’ performance or the way Bharti has been, what is shifting in investors’ mind is more company related where we have domestic consumption stories. I think that is why people are shifting their money from software companies in the last three-six months to domestic facing companies. I think

looks interesting from here also. So, I would be an investor in this company.


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