Edited excerpts:
Do you have a house view on Lupin because it does not seem like the USFDA woes are ending for the company?
One has to watch out for Lupin’s EIR (Establishment Inspection Report) but the Goa plant is not so significant. It is insignificant but if something on a positive side does happen on the Goa plant, it will be much better for the business on vicinity opportunity. However, on the US market, the premiumisation and the margins are now curtailing for all the pharmaceutical companies.
What about corporate banks? Should investors avoid Yes Bank right now since it seems that Madhu Kapur and Rana Kapoor are still very much at loggerheads?
Yes, the dilemma is still there for corporate banks, particularly Yes Bank. Top deck rejig is also happening now. Three directors have already resigned and the term is ending in January 2019 for the founder CEO. This will put some pressure on investors but the way the business is going and even with the news that came up yesterday that the promoters have made a partial pre-payment on ₹400 crore of non-convertible debentures held by Reliance Mutual Fund and Franklin Templeton Mutual Fund. With a book value of Rs 130 for FY19 and Rs 140-145 for FY20, it seems that most of the pessimism and the annual misreport and other stuff are already priced in.
Gradual tranche maybe an opportunity to have a tranche-based investment into this company.
Is HUL still a buy at 1700 plus?
All the consumer companies have been showing a double digit volume growth since last three-four quarters and rural consumption and the rural income state is improving with MSP hikes and the distribution networks widening. Also the Patanjali competition threat has receded.
It seems that HUL, Britannia and even Dabur are doing well with the rural consumption picking up. Another added point would be if it is a defensive sector. That is why they are quoting at 40-45 PE multiples and there are enough arguments over their past history but we can still look at the defensive ones.
What is your view on Sun Pharma?
The planned $1 million acquisition of Japan’s Pola Pharma will not be much significant but the USFDA issue is there and any clearance further would lead to some uptick in the business environment. The price has already corrected and at Rs 25 EPS on FY20 basis, it is quoting at around 20 times PE multiple. Earlier, at Rs 630, it was much more expensive. At the current price of Rs $80-500, Sun Pharma would be an opportunity for investors. But one should expect 20-22% appreciation and not 100% appreciation.
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