Rahul Arora, CEO of Nirmal Bang Institutional Equities, on Wednesday said that specialty chemicals is a big theme in the next 9 months.
“The one big call we can make is on specialty chemicals. I think some of these stocks have seen a bit of a rerating and we have spent a lot of time over the last few months initiating coverage on almost 9-10 companies in that space which we looked at very closely. If you are looking at the midcap and smallcap index, over the next 9 months, this could still be one theme that could play out in a major way,” he said in an interview to CNBC-TV18.
Within specialty chemicals, Arora is positive on Navin Fluorine and SRF. “Our two top picks on the larger chemical side would be Navin Fluorine and SRF. We are forecasting doubling of profits for Navin Fluorine between now and FY23 along with some margin expansion,” he said.
Arora is also looking at doubling of profits in Rossari Biotech, Camlin Fine Sciences, and Fine Organics in the next 2 years. He also expects a 250-300 basis points margin expansion.
He is also positive on CONCOR. He is expecting a double-digit RoE by FY23 and margin expansion of 150-200 basis points.
“We are expecting the railway freight market share, which is currently at about 28-29 percent for CONCOR, to edge up to the mid-40s. It is not the cheapest company, but it is one of the premium PSU companies that you have, going around. It is a very capital intensive business, in the last few years it hasn’t done a double-digit RoE, but our call is that by FY23 this will become a double-digit RoE company and that is where you will see the valuation rerating happening for this company,” he said.
According to Arora, within the technology space, the focus is shifting back towards the largecaps. He is positive on HCL Technologies and Tech Mahindra.
“The kind of moves that we have seen in the midcap IT companies, I think over the next 9 months if you are taking 2021 as the benchmark, the focus might shift back to the largecap names. If you look at names like HCL Technologies or Tech Mahindra, from here I think there is scope for them to even outperform something like TCS and Infosys from a stock market perspective,” he said.
He also believes that 2021 could be a range bound year for the market. “I think this is going to be a range bound year for the market. I think 14,000 on the way down to about 15,500 on the way up -- you are going to have some ferocious moves on either side. This could probably be the year where you have 150-200 point intraday moves on the Nifty because the market has pretty much discounted FY23 earnings -- that has rolled over to that effect,” he said.Watch video for more.