Among steel stocks, Jani holds Tata Steel in high regard, but believes certain pallet players like Godawari Power are better positioned due to improving spreads. Additionally, Jindal Steel & Power’s efficient captive unit for raw materials may offer a more attractive investment opportunity.
From the end of last year till middle of this year, the PSU sector, be it defence, railways, infra or power names – had been the most buzzing segment. But that rally had fizzled out in the latter half of this year. What is your take on PSUs. A lot of people are hoping that there will be a rebound in the government spending come H2 of FY25 and PSUs will revive?
Hemang Jani: Yes, some of these companies which have corrected quite sharply in the past two months are showing a good rebound and it is not just the stock price rebound. But when you look at the numbers, the order inflow and the guidance part also, some of them are showing a lot of promise. Both Bharat Electronics and HAL have delivered good sets of numbers and we think that from a core investment perspective also, there is a merit in looking at some of these companies and some of the power companies. NTPC is something that we like and given the demerger in the listing of the NTPC Green IPO and the renewable business, the renewable part is showing a lot of promise. So, we would have a positive view, but one should be far more selective when it comes to some of these PSU baskets. One should be looking at niche selective companies.
What is your view on Bajaj Finance?
Hemang Jani: Bajaj Finance has actually underperformed the Nifty or even Bank Nifty for that matter. But we do think that given the kind of divergence that we are seeing where the microfinance is going through so much of stress, there is going to be a preference for a far more stable kind of a player like Bajaj Finance and the management meet that was there day before was also quite encouraging on most of the operating parameters, be it AUM growth or the disbursement. The company is doing well and when there is a case where the CRR has been cut or going forward, if there is going to be a rate cut, some of the NBFCs will be better placed when it comes to margins also. So, a positive view on Bajaj Finance from a medium to long-term perspective.
One sector that has of late been very much in news has to be the cement sector. Consolidation is underway but what is making headlines of late is the cement price hike that these players have taken pan-India. But the problem that brokerage houses are also indicating is that the demand has not been that great and so there are chances that the cement companies may have to decide on whether to roll back the hikes or not. What is your take on this entire cement space and how it will impact the financials of these companies.
Hemang Jani: I think that the pricing is getting better and after almost two years of low margins,now the cement sector could show a bit of a rebound in terms of operating margins. Also, the core story when it comes to the real estate sector doing well, the government spending could come back in a big way. I think that the overall dispatch growth is going to be good. There is a fair bit of consolidation as some of the companies in different regions are being acquired by incumbent players, and that also bodes well. I think that it makes sense to go for some of the companies in the largecap, maybe UltraTech, Ambuja and in the midcap JK Lakshmi, some of the south-based companies like Madras Cements, Ramco Cement present a good entry point.What is your take on the steel counters? Today Morgan Stanley has come out with a note where they are highlighting that the steel sector is seeing some green shoots for spread expansion in 2025 and they believe that the steel counters should do well in 2025 as well. Do you agree with this particular view and any of the top bets from this particular sector?
Hemang Jani: Steel is showing a good amount of rebound primarily on the hopes of better stimulus from China and we have seen that the iron ore prices also have remained good. If there is a rate cut, then surely will help the entire metal sector per se.
We like Tata Steel. We do think some of the pallet players like Godawari Power are also better placed because the spreads are getting better and maybe something like a Jindal Steel & Power which is a slightly better captive unit when it comes to the raw material, is also a better play. So, one should go with a positive bias as far as steel companies are concerned, primarily because of the way things are panning out on the stimulus front.