Markets: Is the party over for defence and shipping stocks? Daljeet Kohli responds

Is there any merit in believing that banks will finally make a second comeback this year?
Daljeet Kohli: So, look, it’s more of a valuation “Recovery is something that has not been involved in this entire leg of the rally. So, when we see that right now, when almost the entire market is in full turmoil, everything is on the more expensive side, we would try to find something that is priced lower or relatively better. I think banks have not been doing so well in the last few months, that is why there is some kind of rotation happening there. I don’t think the problems in the banking system are going to go away all of a sudden. This deposit problem is going to be quite tough and not so easy to resolve. It will take its own time. It is not that it will be a permanent failure or anything like that, but it will definitely take some more time. So, for the moment, as far as our portfolios are concerned, we have been oriented towards the financial services part, which is mainly housing finance and some of the NBFCs, those are the areas that we are looking at and prefer over traditional banks. So, at the moment, the positioning is more towards the financial services side.

Defense, shipbuilding stocksIs the party over for some of these actions?
Daljeet Kohli: Look, in these stocks I would say they are priced in way too early. So whether the party ends or not will depend on this issue how long it continues or whether the liquidity continues to come in and people find out that this is an area where the industry is on the rise, so a lot of growth There is a lot of potential.

We all believe in all those things, but the question is what valuation are you getting into? So if someone had gotten into a year or two ago, as you said at the time, it was something that was undervalued, but they have probably paid for the next five years of growth in most of those stocks.

So the only way to arrive at a rational valuation would be a time correction. In any case, we have not invested in any of these stocks and in fact we do not recommend investing in them even after a 20% correction because we believe their valuation is way ahead of date. They are all good companies, they will continue to perform well, but they have already been paid for the next four or five years of performance.

The point is always that no one is debating the long-term story when it comes to the wire and cable industry and how much growth and how much growth they can actually post. But the question is, do you buy them at current valuations after the run-up these stocks have already had?
Daljeet Kohli: So, we will definitely not buy at the current valuation. We are very conscious of the valuation part. We usually tend to avoid things that are too extravagant and go beyond the valuation.

So it’s very important. As you said, we are also very optimistic. energy sector As a theme, an entire sector and it can be played across all its sub-segments, be it generation, transmission, distribution, ancillary service providers and we have some of those names in our portfolio as well.

But these companies are certainly very good. They have been delivering good numbers and very solid growth. But again, the entry point is something we need to keep in mind because from an alpha generation standpoint, it is very important at what level you enter the stocks, that will make the difference.

What is the correct way to value Ola shares?
Daljeet Kohli: Again, we’ve avoided that. The right way to look at it would be the same. Do you believe the story and then build numbers on those wishes and hopes of what kind of numbers will emerge or would you like to see some green shoots from those numbers in terms of profitability.

So, we will definitely wait for them and that is why we avoided the stock even at the time of listing. We have discussed a lot among our colleagues, someone was giving me a very strange way of valuing this company, that you have to value it based on the capacity of the battery pack, per megawatt of battery pack, what kind of value they have and then compare it to Amara Raja and Exide And if these guys are one step ahead with the battery, they’re giving you the vehicle too, so you should give them double the value.

Now, in a bull market there are all these strange ways of valuing companies. Last time we looked at the price-to-sales multiple. This time we’re looking at something different. So these kinds of things will continue to come up, but I think you have to be rational, ultimately the share price will be a slave to profitability.

We have to look at profitability over a period or if the visibility of profitability is not there, but there are some indications, something coming up in the next six months, next year, you will see that number. For now, it is just on paper, all the numbers, the theory. We will see how it develops and maybe at some point we will get into it as well.