What is your view on Tata Steel given the debt reduction and the cash flows are also going to be super. SAIL may be a trade on steel cycle, JSW may be a play on steel cycle but with Tata Steel, we are getting this entire debt reduction story and the Corus baggage getting over.
Debt reduction is largely in the price now. The stock will move in line with the underlying steel prices. My view is that no super cycle in commodities is going to play out given the again it all comes down to China which people do not understand. About 50-60% of consumption of all commodities comes from China. The US might come out with whatever kind of infrastructure but actual implementation will need to be seen. Even then, the incremental demand that they have generated will not be able to compensate for the kind of declines we are going to see from China.
So steel has had an up cycle. 2022 will be tough for commodities. It is not going to be an easy year for commodities given that liquidity is going to move out, speculative money is going to move out and China is going to slow down drastically. People need to be wary of metals stocks, especially steel stocks. I would not think that there is any near term buying opportunity.
Focus is back on some of the auto ancillary names like a Sona BLW, etc. because news is that even these traditional players like Toyota or Ford are gradually focussing their business models on to EV plays. That should augur well for some of these globally linked auto ancillary names?
There are two sides to it. One, the overall auto demand has been muted for last year. After a pickup, we are seeing significant declines on a month on month basis in auto sales not only in Europe but also in China. The overall pie is shrinking and given what is happening in China and considering China has contributed largely to the increase in auto sales over the last many years, overall auto sales will remain a challenge.
Now we could make out a story that on the flip side, because of EVs, some of the components manufacturers might benefit but that is somewhere down the line in terms of technologies and investments. Also these companies will have to make new investments. There is a one to one correlation. I would still think that for the auto industry, the near term could be tough and to that extent, I do not really see a big story in auto ancillaries at this stage.
is somewhat different because it has other verticals like the defence and aerospace verticals and other areas it has got into. So, Bharat Forge is definitely a stock which people should have on their track and accumulate slowly because its long term prospects are strong.
Is buying into a good idea? It is into the experiential biking segmen, the 350 cc plus segment – and I doubt an electric disruption is happening in that space any time soon?
There is no electric disruption happening and they seem to have got their house in order and some of their models have started doing well. They have started surprising on the upside, unlike the other two-wheeler or auto companies which have not been surprising on the upside. In fact the surprise has been on the downside.
This month’s numbers for Eicher Motors were pretty strong and it seems to represent an opportunity for value investors. From here, the stock has the potential of giving decent returns.