ET Now: Which are the three midcap stocks where you are convinced that the current decline is a good God send opportunity to buy these stocks? You are confident that earnings will pick and a year from now, 18 months from now, these stocks would be higher.
Yogesh Mehta: For the midcap, especially if we talk about on the banking side, RBL Bank has not corrected significantly. I will put a name, because with two years down the line it seems that the growth with 35 to 40 per cent AUM growth rate is being confidently highlighted by the management and we also feel so. So, the confidence remains there.
Second, we can suggest on Titan where migration from unorganised to organised sector with ample opportunity to diversify and growth opportunity for the jewellery segment as well as the luxury segment would be together. So, there is immense potential for Titan as well.
The third one would be on the NBFC side. With rural consumption and rural recovery happening along with good monsoon for the third consecutive year, Shriram Transport Finance is one company where we would be looking at.
These are the three stocks which on the orders side I would recommend to having in the long term.
ET Now: Coming on to this highlight because I think it just markedly changes the way one would look at ICICI Bank. If ICICI Bank can resolve its legacy issues with the bad loans that they lent on the corporate side, I think the future looks balanced and bright in terms of how they would be able to de-risk their loan book for the quarters to come. I do not know when that would play out, but one would imagine that it would happen sooner rather than later?
Yogesh Mehta: Yes, that is true that the leadership problem is a different thing. But, they have cleaned up the books from the last financial year and ongoing projections also seem to be very strong. They are very much concerned over the asset quality and now very cautious on disbursing fresh loans.
So, putting all this together it seems that legacy issues and everything is far behind now for the bank. So, one should look at it as a fresh story and with a blank page now. Everything has been written off and now a fresh chart can be given from hereon with a little less than or around two times price to book. Looking at the focus towards retail loan book and asset quality gives a strong vicinity about growth for this bank and at two times price to book, it gives a clear picture about investment story from hereon.
ET Now: For the next one year, would you buy ICICI Bank or HDFC Bank or both or none?
Yogesh Mehta: See, HDFC Bank is a traditional one that any person can give a blind name. Yes, HDFC Bank is a buy, but on the contrarian side, ICICI Bank is equally good. So, I will keep both in addition to IndusInd Bank.
It is not like a blind buy. One should keep his eyes and ears always open, but on the valuation front, I am talking about that four times price to book and two times price to book, both have their own advantages and disadvantages.
So, on the performance side, one can have this four-time price to book HDFC Bank in the portfolio. To play on the high delta on the portfolio gains, ICICI Bank is also a portfolio buy.