Short Call: Bear argument for defence stocks, realty signals, Kajaria, Cipla, Polycab, BoB, Alembic in focus

short call: bear argument for defence stocks, realty signals, kajaria, cipla, polycab, bob, alembic in focus

Short Call: Bear argument for defence stocks, realty signals, Kajaria, Cipla, Polycab, BoB, Alembic in focus

“I wasn’t the fastest guy in the world. But I like to ponder. And pondering things, just sort of thinking about it and thinking about it, turns out to be a pretty good approach." - Jim Simons

The strongest argument for defence stocks at this point are their bulging order books. Of course, the market is ignoring execution risks right now because the quarterly earnings growth so far has not given any cause for worry. But there is another risk that the market may be overlooking, according to a senior portfolio manager Short Call spoke to.

If defence companies continue to make super profits, the government may somewhere down the line look at capping the margin. And there is a precedent for that. In 2018, the Ministry of Defence had cut the benchmark margin on contracts awarded on a nomination basis to 7.5 percent for both the value-added and bought-out components.

Nomination contracts are those awarded by the government to PSUs through a cost-plus framework. The move triggered a sell-off in BEL, and over the next couple of month, the price fell nearly 30 percent.

The portfolio manager’s concern was flagged by analysts at Kotak Institutional equities in their report on PSUs in general, earlier this year. "The government’s three-in-one role of buyer, owner and policymaker creates uncertainty regarding the companies’ future earnings and returns,” the report said.

On realty, the portfolio manager said that the market seems to be taking comfort in the fact that previous realty upcycles have lasted seven years. While the long-term story looks good, the price one paid should be viewed in terms of at what point in the current upcycle the stocks are at.

The contra signals he is looking at is a steady increase in 20:80 schemes that developers have begun to offer in markets outside Mumbai. Also, there are signs that the number of buyers looking at the purchase as an investment than actual use, is on the rise.

Kajaria Ceramics (Rs 1180, flat)

Reported a tepid set of Q4 earnings.

Bull argument: Boom in residential property to be beneficial for tile makers like Kajaria. Tile volumes volume were up 6 percent in FY24, compared to flattish industry growth. The company is aiming for 11-13 percent growth, with tier-3 and tier-4 cities driving demand.

Bear argument: Near term outlook remains soft, and valuations not cheap at 33 times estimated FY26 earnings, says broker Systematix.

Alembic Pharma (Rs 976, -2.6%)

Reported a decent set of Q4 numbers.

Bull argument: Company planning to ramp up US generic portfolio with 25 product launches this year. No major capex likely, so margins should improve.

Bear argument: Analysts expect price erosion in the US generic market to stay elevated. Most of the growth in revenue and margin priced in, says Antique Stock Broking, and so upside from current level limited.

Bank of Baroda (Rs 255.10, -2.9%)

Q4 earnings on expected lines.

Bull argument: According to analysts at MOSL, the Bank reported an overall steady quarter characterized by one-offs. The bank has reduced its dependency on bulk deposits while shifting its focus on CASA and retail TDs, which will support NIMs, according to the brokerage.

Bear argument: Slippages rose from 1.1 percent to 1.3 percent QoQ driven by higher MSME and agri slippages, according to Nuvama analysts.

Polycab India (Rs 6180.25, +6.5%)

Reported its highest ever yearly and quarterly revenue and profits.

Bull argument: The company is investing in capex and is well positioned to capture the strong demand in India, said Keynote Capital.

Bear argument: The tax issue could be an overhang. Plus, it also raises questions about corporate governance and about internal checks and balances.

Cipla (Rs 1,340, -1.4%)

March quarter revenue and margin lower-than-expected.

Bull argument: Ranked number one Pharma company in the South African prescription market. Strong India franchise, robust US pipeline, healthy margins, and improving return ratios key positives, according to Nirmal Bang.

Bear argument: EU and emerging market sales affected by geopolitical and macroeconomic challenges. Patal Ganga facility issued with six observations by USFDA.

OTHER NEWS

2 hrs ago

Battle For Bengal | Modi Vs Mamata Banerjee: Who Is Leading The Bengal Fight? | TMC Vs BJP | News18

2 hrs ago

Cannes winner Anasuya Sengupta wore 'flea market' outfit at the film festival

2 hrs ago

Smartphones are making Indian kids Myopic, numbers double in a decade

2 hrs ago

IndiGo To Offer Business Class Seats On Key Routes, Full Detail Inside

2 hrs ago

UP Board Class 10 topper Prachi Nigam, trolled for facial hair, says this to women in glow-up video: ‘Never try to…’

2 hrs ago

Terrifying video shows 2 women's ordeal as they face violent Texas tornado: ‘I'm shaking, the car’s still shaking’

2 hrs ago

KS Ravikumar reveals he will be making 'Pistha 2'

2 hrs ago

'Virat Kohli up there with Cristiano Ronaldo and Lionel Messi': Former Kiwi skipper hails India superstar

2 hrs ago

Summering without the summer blockbuster: Why was May such a dry spell at the movies?

2 hrs ago

Rs 8.3 Lakh For India vs Pakistan T20 World Cup Ticket At New York Stadium

2 hrs ago

IRCTC Dividend 2024: Big announcement likely by Railway PSU in financial results - Check date and time

2 hrs ago

NMDC dividend 2024 announcement, record date - Latest news

2 hrs ago

Lok Sabha Elections 2024 Outcome: What Are Brokerages Saying? | Stock Market Update | CNBC TV18

3 hrs ago

'If NDA wins over 300 seats…': Emkay's Manish Sonthalia predicts Nifty50 trajectory

3 hrs ago

Delhi court refuses to summon Kejriwal

3 hrs ago

How to change mobile number for your Aadhaar online: A step-by-step guide

3 hrs ago

"I don't follow records, records follow me...": Cristiano Ronaldo after breaking Saudi Pro League record

3 hrs ago

HAL stock in focus after India, France begin talks for ₹50,000-crore Rafale Marine fighter jet deal

3 hrs ago

Govt plans to build dormitories near manufacturing clusters so workers don't leave

3 hrs ago

Darker than you think: Ranking the 10 most disturbing anime series

3 hrs ago

Working closely with Papua New Guinea authorities: Australian Foreign Minister

3 hrs ago

Best gaming accessories under ₹2000: Top 7 options to level up your gaming experience

3 hrs ago

iOS 18 will be all about customisation options in iPhone: Recolor App Icons, Home screen and more to expect

3 hrs ago

Meet Billionaire Sridhar Vembu, Who Built A Rs 9,000 Cr Company, And Still Rides A Bicycle

3 hrs ago

Note saying ‘bomb at 5:30’ found on Varanasi-bound flight, prompts evacuation

3 hrs ago

UP Board topper Prachi Nigam's message for women in ‘glow-up' video posted by influencer

3 hrs ago

'They are all slowly killing us': Zerodha's Nithin Kamath urges Indians to question food choices

3 hrs ago

Sensex Rises 150 Pts, Nifty Above 22,950; Timken Jumps 6%, Inox Wind Falls 7% | Opening Bell

3 hrs ago

JioCinema launches ad-free plan, available at a lower price

3 hrs ago

Rs 100 dividend, 4:1 bonus issue: Multibagger stock's mega reward! 220% return in 6 months

3 hrs ago

West’s ‘balancing act’ on India, diaspora divided over BJP mobilisation — global press

3 hrs ago

Arvind Kejriwal's ‘Atishi next’ prophecy after defamation summons to Delhi minister

3 hrs ago

Investors whistle as pressure cooker-maker announces 600% dividend – Check Payout Date

3 hrs ago

IRCTC Share Price Target 2024: Stock Dip Ahead Of Q4 Results - BUY, SELL Or HOLD? Check Expert Insight

3 hrs ago

Toyota shows 'an engine born' with green fuel

4 hrs ago

HDFC To IDFC, Changes In Credit Card Rules You Must Know

4 hrs ago

'Pushpa 2': Allu Arjun, Rashmika Mandanna tease fans with new poster ahead of second song release

4 hrs ago

Mukesh Ambani's Reliance Industries signs a one-year deal with Russia's Rosneft

4 hrs ago

‘Will TMC let loose goons on judges?’: PM Modi on Calcutta high court's OBC verdict

4 hrs ago

Invest 10% Of Your Salary Every Year: Self-Made Millionaire Ramit Sethi's Advice To Youngsters