stocks to buy: real estate looks convincing; buy bank stocks on troughs: Deven Choksey
Macrotech, officially called Lodha Developers, raised Rs 4000 crore via QIP. This only solidifies the comeback of the real estate market. Can this start the trend for real estate companies to seek fundraisers as buyers return to the market?
In general, the real estate space is seeing better times. Given the situation in which the subways currently operate, residential real estate inventory levels are now virtually in use. Obviously, there is no more excess inventory in most pockets. In view of this kind of situation, demand for residential properties is likely to continue in the future. In addition, as the cost of funds for buyers is significantly lower and given the increase in working from home or anywhere, the demand is increasing and real estate will also be equipped to handle this kind of situation in the future. ‘to come up.
There is also a demand for larger homes, which will likely give companies like Macrotech more leeway in the future. The PAQ means that balance sheet restructuring is also underway, including debt repayment. At the same time, investing in more recent constructions, which is now the order of the day. Real estate as a space therefore looks much more convincing than ever when it comes to growth and most importantly, land prices do not increase as much and the cost of construction is still factored in. Stable prices increase demand and so I stay positive in this particular space.
Do you believe that building home accessories is bound to work well? Most of the construction stocks had a good correction over time as things started to open up there. There is also a fair amount of unsold inventory in ancillary products like Havells, Asian Paints, etc. Maybe sanitary products companies should be doing as well?
It is the only space that is going to be a direct beneficiary of what is happening in the real estate space, even if commercial real estate is not yet showing a complete turnaround. But in commercial real estate, a sort of use-by-use mechanism has already started and that’s where we’ll likely see growth instead of ownership. In commercial real estate, users will pay for the use of commercial real estate. The advantage here would be that commercial real estate prices would remain fairly stable, while the residential real estate space is already booming.
The hardware space that powers around 450 different industries is also going to be in demand. The real challenge in the material space, including cement and even paints, is that everywhere the prices of raw materials and energy have increased. As a result, the cost of construction has likely increased and this could pose a threat to some extent, if not totally.
As for the demand for technology, it might be smaller to manage. The cost of hardware is a challenge, but these companies are having relatively better times. Most of them echo the feeling that there is a huge demand on one side. Indeed, there is a waiting period of 45 to 60 days for the delivery of materials. The demand scenario is therefore quite strong on the supply side of construction materials.
InfoEdge is one of the biggest winners of 2021. The IPOs of Zomato and Policybazaar have been big hits. Both are InfoEdge holding companies. They also continue to invest in new start-ups. What is your assessment of the stock?
The company invests and invests in start-ups, supports them for more than five to seven years, then monetizes these companies. It’s the typical equivalent of a start-up fund, but in a listed market space, where you have the opportunity to buy some of the emerging companies that will be the unicorns of the future. Over the past few years, they have fueled some of the investments that are now monetized.
Do we have clarity for the next few years regarding the monetization of the existing investment portfolio? I guess they would end up being monetized, but I’m not too sure in the given time frame. Zomato and Policybazaar have been trading in quick succession over six months, but I don’t know if a similar approach would continue for future companies. For now, from a valuation point of view, there are no arguments on this. It is incomprehensible but the fact remains that the potential is high. We would like to hang on if we have invested. Otherwise, there will be an opportunity during the temporal market correction.
In this consolidation / correction over time within the banking universe, would you try to buy any of the dips or underperformances for that matter?
Absolutely yes. In fact, it is an area where I remain extremely convinced and positive because of the few facts. On the one hand, the retail consumption of products is increasing and, as a result, the use of retail credit is also significantly higher. In fact, the latest quarterly results of the NBFC showed a 17% growth in the retail sector.
As a result, we find that some of the investment banks are heavily retail oriented. The likes of ICICI see a higher amount of retail credit drawdown. At the same time, new infrastructure projects are being rolled out. Greenfield projects will require a higher amount of credits which so far have been muted. Last but not the least, some of the biggest banks, public sector banks that have had the capacity to lend but have not been able to do so due to the problems with unproductive assets which are now being wiped out.
Recently we heard from SBI and BoB that NPAs are now behind them and they will likely see more lending capacity. All in all, credit on the one hand, business credit on the other and also infrastructure loans from some of the biggest banks overall are likely to stimulate credit growth in the system and c This is where I think the best time to come is for the banking space as a whole. Of course, it will be necessary to be more selective when buying stocks, in large part those which manage liabilities well.
The banking space is worth looking at, given the type of price correction and sideways movement. One could seek an appreciation of 20 to 25% if one buys at a lower level in the banking space.
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