How to position in ITC? Siddhartha Khemka answers

As the market has sharply moved up in the last four-five days, the focus could shift back to defensives like IT and pharma in the near term, says Siddhartha Khemka, Head of Retail Research, MOFSL.On SBI& the PSU banks State Bank of India( SBI) has put up a very strong performance. We belief the earnings normalisation round for SBI has begun. The skepticism that was ushered in after the Covid-1 9 pandemic and the lockdown has reduced significantly and move forward we appreciate health NII growth and a strong recovery in retail credit growth. Overall, things are looking pretty good for SBI. The Indian economy, which was pushed into a slowdown because of a world pandemic followed by lockdown, has retrieved from its lows, helped by the unprecedented global response from the governments as well as the central banks. We had been waiting for a convalescence even before the pandemic started. The kind of steps that the government has taken and have been previously spelt out in the recent Budget will go a long way in sustaining proliferation for the next few years. In the present circumstances, the corporate side of lending should do well. The government is clearly focussed on the performance of PSUs and plans to recapitalise some and has also talked in terms of privatisation of two PSU banks. For the first time, they are not saying disinvestment, they are using the term the privatization of two PSU banks. These steps will reinforce the market confidence in the PSU banks’ basket. SBI is a torchbearer when it comes to PSU banks. We “ve always been” positive on SBI, given the valuation comfort. Now with asset character under control, growth is looking much better. Among the PSU banks, SBI should be the top performer.On Zee Entertainment Overall, Zee has reported strong amounts. Their EBITDA grew about 13% on a year-on-year basis, adjustments to the one time content syndication deal. However, what does have an impact on the market was that the margins were lower and the general guidelines that the company has given both in terms of growth as well as the boundary, has been much less than what the market would have preferred. This is impacting the overall sentiment for the stocks. Given the earlier runup, there could be further earning booking in the stock. We believe that while the revenue recovery has been very encouraging, the high-pitched investment in content acquisition and the lower perimeters, especially in the movie production business, will remain an overhang. We maintain a neutral rating with a target price of Rs 265. On Nifty5 0 constituents Pharma as a sector has learnt pretty good results. Some kind of consolidation has already happened within the pharma space. As the market has sharply moved up in the last four-five days, in the near term, the focus could change back to some of these defensives like IT and pharma. The results are expected to be pretty strong for Divi’s. Some of the companies like Neuland Labs have come out with strong numbers. The stock has corrected and has started recovering and we could see some positive momentum out there. ITC is doing well now but in the long term, the stock has largely underperformed in the consumer space and it has got some interest after the Budget. The belief from ITC is not that great. Overall, the cigarette volumes have improved sequentially but still it is down 7% on a year-on-year basis. However, there has been positive commentary from the managing recently on the inn the enterprises and the non-cigarette FMCG business and these could drive the overall earnings for ITC. But even if the numbers for the other segments improve, the core segment will continue to have a smothered number and hence we have a neutral rating. A initiation could be the demerger which is doing the rounds in the media. We are not sure it will happen but if anything of that sort were to be announced, then look at ITC from the the results’ perspective.

Read more: economictimes.indiatimes.com