Bullish on OMCs and HFCs: Rahul Shah, Motilal Oswal Financial Services

In a chat with ET Now, Rahul Shah, Motilal Oswal Financial Services, says advising clients to avoid Tata Motors and loof at other auto cos.

Edited excerpts:


What is happening with Tata Motors?

Obviously this was Tata Motors disaster quarter. This is the second in a row. So what happens going forward is going to be a question. Investors will wait and we will see a lot of near-term challenges. Though management has guided that margin expansion would be around 13% to 14%, we do not expect that and still feel that the next one or two quarters could be muted or painful. The near-term challenges remain. The stock might slide more from here. So we would advice that there are better other consumer names in auto place so one should look at those rather than Tata Motors in near term.

Because Tata Motors was so cheap, had Motilal Oswal as a house or your team to your clients adviced people to move into Tata Motors and if so, if they are sitting on profits or breakeven or even losses, would you advice them to get out of Tata Motors and switch to other auto names?

Obviously a lot of clients are sitting on Tata Motors. We are now advising them to exit in near term but fresh investments are going to be on hold till the next quarter or so. The valuation is cheap and going forward one can look to buying but near term, the stock might languish here and obviously we are going to book profits whether at cost or maybe near the minimum losses. We might exit near term in Tata Motors.

Any other earnings which have been significant on your book and perhaps you have re-rated the stock to a fresh buy now?

Near term, we have come up with results where we have just rerated it but our conviction on oil marketing companies has been quite bullish since last two, three or four quarters and we continue remain bullish. Maybe a little bit soft in some of the oil marketing companies because of inventory loss or due to softer margins. But the visibility going forward continue to remain robust. We would continue to advice buying oil marketing companies from here also.

What is your opinion on Lupin?

Overall pharma as a sector is facing a lot of challenges and you need to be very selective in cherry picking. You can look at Lupin for investments but in near term, it should be avoided.

A couple of other results that have come out. One Natco Pharma had an excellent set of numbers. The stock did not react duly yesterday and of course Tata Motors and Sun Pharma took over but the numbers were fabulous. I was looking at the numbers of Voltas which were not too bad either. In fact, quite strong EBITDA margin performance as well. Any thoughts here on these two?

Voltas, definitely yes as the stock has been outstanding and we saw some kind of selloff and decent set of numbers again. We have been quite bullish on Voltas for quite some time. One can still look at Voltas from the current levels. It should be better in next two quarters.

Leave us with one top idea from the Motilal Oswal stable right now -- either a short-term trading play or medium-term investment play.

One should look at housing finance companies. A lot of time, I have given recommendations on this. We are quite bullish on that. One can still look at Can Fin Homes, which looks expensive prima facie but looking at the kind of growth, kind of balance sheet and kind of momentum the stock has, we would still recommend clients to buy Can Fin Homes on the current levels.