Pankaj Tibrewal, senior VP & fund manager at Kotak Mahindra AMC, shared his views on the fundamentals of the market.
Tibrewal is positive on the cement sector. “Our broad thesis remains that over the next three to four years, supply will lack demand which has not been the case for the last five years. In our estimation, even if demand grows by 6-7 percent over the next couple of years, supply will grow at not more than 3-4 percent and that means higher capacity utilization and pricing power in the hands of manufacturers,” Tibrewal told CNBC-TV18 on Thursday.
“From the cost side, worst of the cost inflation is behind us in terms of petcoke, coal, and transportation cost, and that should help in margins. Q4 was the first quarter after many quarters where we saw utilization inching up for the larger cement manufacturers, you saw the profitability improving. That probably is an indication for the sector as a whole. In our view, over the next couple of quarters if pricing remains where it is, you will see a sharp improvement in profitability for most of the cement manufacturers going forward,” he added.
With regards to the financial sector, Tibrewal said, “We believe that the peak of gross NPAs is behind us. The NPA cycle has bottomed out and from here on even if some of the large accounts go under, it will not be to the same extent as what we have seen over the last three years.”Tibrewal has an overweight position across the portfolio on corporate lenders. “We believe that the corporate sector lenders are the best placed in this environment. If you look at FY20, a large part of earnings growth in our view, about 40-50 percent of the earnings growth, which we are forecasting in FY20 would come from the corporate sector lenders, mainly the two private guys and one PSU and Nifty. The rest of the PSU pack also moves from loss to profit which aids the overall earnings recovery,” he said.
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