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    M&M could see 50% upside in next 3 years: Sandip Sabharwal

    Synopsis

    “One largecap which trades at a significant discount to the market and is very under owned and in my view is entering into a good growth cycle of at least two to three years. I would still think that there will be buying in this stock now on every dip.”

    Sandip Sabharwal2-1200ETMarkets.com
    “Till Mukesh Ambani is there, I do not think there is going to be a demerger of Reliance. I do not think it is going to be split or anything,” says Sandip Sabharwal, asksandipsabharwal.com

    Soon TCS will officially kickstart the earnings season. Is the pain over for IT or do you think there is more to come?
    In IT, my limited point is if you see the commentary of many of the technology companies and others over the weekend and from the US too, everyone is talking of a downturn coming. Indian technology companies continue to maintain that there is no impact on demand and there is going to be no impact on their demand. This does not gel with each other and that is the risk I see in technology stocks.

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    Only when the managements accept that there is a realistic possibility of a downturn and we could see some pressure going forward, that is the time we look at it. I would still think that there is too much optimism around the IT demand scenario, given what the macro news flow is.

    Read Also: No real sellers in ITC, stock to trend up if buying continues

    I am with you when you say that the markets are excited but a) the stocks have corrected; b) so far the forward looking commentary does not talk about a lot of caution?
    Yes, it does not and that is the risk because what happens is first the business to consumer (B2C) companies get impacted. So, Apple, Amazon or companies which are directly chasing the consumer get impacted first and then the B2B companies. Indian technology companies are largely B2B. Then the impact starts getting felt there and so there will be a three to six month lag. That is why I would remain cautious because these are such high cash generative businesses that one cannot be very negative on them. They are debt free also. But I would still be cautious because there is no near term play in my view, I do not think there is going to be any big upside in the near term and once the slowdown gets accepted sometime down the line and the stocks stabilise, I would be a buyer, not now.

    From the auto pack last week in fact for the last 10 days, M&M has been hogging the limelight. The bookings for the new Scorpio start on July 5. We all know about the pricing. Has all of it now been priced in when we talk about M&M?
    I do not think things get priced in so fast in the market, especially given the fact that it is one largecap which trades at a significant discount to the market and is very under owned and in my view is entering into a good growth cycle of at least two to three years. I would still think that there will be buying in this stock now on every dip. It is a stock for long term investors. A year from now it will be higher, two years from now it should be even higher that is how I would look at it.

    How higher can it be – 50% in the next three years?
    50% in three years is realistically possible. I would think that compounding at the rate of 15% plus or 15% band is very much possible given the kind of performance that will come through. One big concern near term was that monsoons seem to be faltering in June and we were now unsure of what will happen to tractor demand. But that seems to be stabilising now.

    Another important stock could today perhaps be the approval by exchanges of HDFC Ltd. and HDFC Bank merger. It looks like the final deck is cleared. Will that stock stabilise now?
    The HDFC, HDFC Bank approvals had to come in because they sounded the RBI. and the approval had to go through. The question here is whether it is favourable for minority shareholders or not. I am somewhat unsure of that.

    HDFC Bank was a much better franchise in current times. HDFC was facing competitive pressures, margins had to come down, growth was slowing down. I think it is a merger of necessity rather than in favour of minority shareholders and that has been the reason why it has been underperforming. Let us see how it goes on.

    You did not ask me but on Reliance I think till Mukesh Ambani is there and I do not think there is going to be a demerger of Reliance. I do not think it is going to be split or anything.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)




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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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