Siddhartha Khemka on why Bajaj Finance saw a sell-off post results

What is your view on the pharma sector and Cipla in particular?
For the healthcare space, even FY23 was a weak period. We are expecting some improvement from the healthcare space with a sales growth of about 14% and PAT growth of about 13%. We are already seeing some of the pharma names reporting improved numbers a), on the back of improved demand both globally as well as in the domestic market, and b), and more importantly, with realizations now stabilising, the cost pressures are coming down.

The biggest overhang that we see is the regulatory overhang, which had eased off in between, but is coming back again. Some of the pharma names have started getting US FDA observations which delay and impact growth per se. But overall things are looking better for pharma names. Some of the names have already moved up and valuations are now closer to the fair zone. Still, in terms of the preferred players, we prefer some of the global exposed names like Sun Pharma, which has much better product global as well as domestic footprint.

Do you have a view on L&T? Also why are Bajaj Finance stock seeing a sell-off?
Bajaj Finance results have been more or less in line with the expectation and we are seeing the kind of reaction from some of the companies after the results which are in line. So it is mostly like a sell-on-news phenomenon. The numbers that have come out are pretty good with net profit growth of 32%, AUM growth of again, 32%, net interest income is up 26%. NPAs have also come down.

Overall, the numbers are in line with our expectations. Today’s reaction is a bit of a sell-on-news kind of thing but we have a very positive view on Bajaj Finance, given the strong growth trajectory that they have been able to maintain, plus the diversification that they are now doing in the financing business, which should help them scale greater heights.

Coming to L&T, the results have been pretty good. The commentary has also come out to be pretty strong in terms of the outlook, especially for the order book that the management is targeting. That looks like pretty strong commentary in terms of the management’s focus towards increasing the overall order book, which could drive growth going forward, especially in a environment where we are seeing that consistently, capex is picking up just before the general elections next year. We expect pickup in execution as well for some of the construction names, which should also help companies like L&T, which is seeing strong momentum in both order books as well as execution capabilities, leading to strong earnings growth.

What is your view within the private banking names? Is Axis something that you like?
In the private banking space, ICICI Bank results were pretty good. There was robust loan growth, stable asset quality and in expected lines, the margins are slightly declining. That is a trend that we are seeing across banking names. We are definitely expecting NIMS to kind of consolidate and marginally come down in the current financial year. The core business growth remains pretty strong. ICICI is the preferred bet within the private banking space having delivered the strong numbers. Even for Axis, we are expecting a strong number and we like Axis but in terms of preference, we would continue to prefer an ICICI Bank over Axis. But we definitely will take a call again, post the results today and the commentary.