Just wanted to begin by asking you about Trent. The stock, of course, had seen a big move this year. A lot of tailwinds that were working out. But today the earnings seem to have disappointed the street. Is this an opportunity to perhaps buy into the stock or it is still very expensive?
Nischal Maheshwari: So, the numbers are good, but they have been below the market expectation. Because if you remember last quarter, they grew at around 55% and this quarter they are around 40%. So, 40% on its own is a very good number. But again, if you have such a frothy valuation 120 times, market is very unrelenting and that is why we have seen this kind of a strong cut. Yes, I do agree, it should be a good time to start accumulating. I would not say go out and buy at one shot, but it is a good time to start accumulating because the 40% growth is still very good.
What is the view on auto, especially the four wheelers?
Nischal Maheshwari: The pain still continues in the system. Two wheelers we have seen some amount of strong rebound in the current quarter. But the PVs as well as CVs, we have not seen any strong rebound as yet. So, there is huge amount of backlog in the system and that is going to be a bigger problem. But Mahindra & Mahindra has done pretty well in this current quarter. They guided that they are going to be doing very well as far as their tractor division is concerned and they have done well. But obviously, as I was saying, frothy valuations and everybody wants to be taking away profits from the market. So, this market has now become sell on rallies rather than buying on dips, that is what I very clearly see now.Do you think days like this could be buying opportunities for the private banking names, the large ones?
Nischal Maheshwari: Definitely. Banks, BFSI, the whole space per se. So, two or three reasons out there. One, the whole space has underperformed and that is why reasonable valuation. Secondly, interest rate cuts.
We are expecting another 25 basis point cut today in the US and sooner or later India will also follow. So, one, in a decreasing rate regime, banks have always outperformed. And the second thing remains to be that in a decreasing rate regime, their margins will also go up. So, fundamentally also, it is positive for BFSI. So, you should be buying BFSI across the whole sector.
Wanted your view on the pharma stocks because in terms of the earnings more or less the earnings have been good or in line with expectations, but the stocks have run up slowly and steadily. If you look at the last 12- to 18-month move on these names, they are up anywhere between 60% to 100% or even more. What looks good in pharma at the moment?
Nischal Maheshwari: So, with Trump coming there, there is one space the CDMO where in September the Senate came out with a Biosecure law and that ensures that more or less all kind of incremental R&D which was being done by or getting outsourced to China gets stopped and Trump is a strong proponent of that and I believe that is a big space.
Across the whole pharma sector, there are four or five stocks big one out there which are going to gain market share. So, CDMO is one space within pharma which should do well as we go along. But pharma as a whole space per se has been doing okay and we continue to believe that incrementally also pharma should continue to do well in the coming year also.
The other stock I want to discuss with you is Nykaa. Right now that stock is up 7% and I remember the conversation we were having with Nilesh on the Diwali day and the Muhurat trading day and he was talking about how the entire BPC category is expected to take off. Logically it makes sense that the women participation is increasing in the workforce, there is more disposable income, but this stock has pretty much been sideways for a long time and people have become averse to both Nykaas and the Honasa Consumer of the world because of increased competition. Is it time to re-look at these names or there is just that competition worry that might just keep these stocks under check?
Nischal Maheshwari: Competition is a big worry for both of them whether it is Honasa or Nykaa. Maybe Honasa is a slightly better placed out there given they have got products which are more based on natural products so that is why they have a niche out there, but Nykaa’s niche is very-very questionable because they are facing competition from all the large platforms now and Reliance has also come with a more or less a similar platform known as Tira. So, Nykaa has lost its uniqueness basically and that is why we are seeing this kind of underperformance by the stock. I do not see very strong results also coming from Nykaa so it is at best avoid.
This is one space that quarter after quarter I have heard analysts and experts say that this quarter is going to be the worst so there is light at the end of the tunnel, it is bottoming out. But has it really played out? Is it finally the time to look at some of these speciality chemicals back again?
Nischal Maheshwari: I am not sure actually as yet because China is the big spoiler out there and China is once again going to be betting big as far as chemicals is concerned. So, we have to understand that China is not an ROE player, they are scale players and India on the other hand is more ROE focused players, so that is why China just sells at whatever price and China has got huge capacities and given that their domestic market is not doing well, they are looking for things to export. So, I do not see a quick resolution to the chemical sector.