“ITC is positioned to take off substantially,” says Anand Tandon
ITC has a dividend yield of more than 5 per cent and its cash flows continue to grow robustly, points out independent market analyst Anand Tandon while stressing that long-term investors need patience. He says there is no reason for long-term investors to sell ITC.
In an interview when Anand Tandon was asked about his take on what long-term investors should do with ITC, this is what he said -
“The market has been pro-growth rather than value. ITC has been falling in the unfortunate category of being called value. I think the tide has now turned. ITC is positioned to take off substantially. It has made more money than probably most other FMCGs combined. Though there are issues with regards to ESG, these things tend to be flaky.”
“What matters finally is the kind of cash flows you generate. Sooner rather than later, the value of cash will dominate everything else. Of course, there are good triggers that can make it happen immediately. Breaking up of the company into hospitality and FMCG businesses would go a long way in terms of recognising that value. It has a dividend yield of more than 5 per cent. The cash flows continue to grow robustly. I do not see any reason why an investor should be moving out of it. For new investors, you have to have the patience.”
Further in the interview he also shared his view on SBI and speciality chemicals business.
Commenting on how scalable SBI can be in the next one year, he said, “Frankly, if SBI does not perform then the index numbers in terms of earnings have to come down dramatically. Much of the earnings growth forecast for the index is coming from companies like SBI and metals. Therefore, they have to perform and there is no reason why they won't perform.”
“The worst is behind the corporate part of its (SBI's) book. You are not likely to see any major NPAs in the near term. Credit cost will remain subdued and with credit growth coming back soon, you can expect growth. More importantly, interest rates have probably bottomed out. The pricing ability of banks to increase their NIMs is also quite high,” he added.
“If you take its subsidiaries into account, SBI is one of the few companies trading at a discount to book value or nearly about that level. With the increased ROE projections for the next couple of years, I am not surprised that most people are looking at higher numbers. SBI has to be one of the better performers going forward from here.”
In the speciality chemicals business, where do you sense a fresh buy opportunity?
“This is one of the sectors that has become fairly over-owned and well discovered. There is no doubt that there is a case to be made at a macro level given that China has withdrawn from the scene and we are probably best positioned. Many of the companies have strong technologies which they can use as a basis to expand. It is difficult for me to name a single company. One opportunity is to just buy a basket of them. If you are looking for exceptional technologies, I would argue that things like fluorine, etc are difficult to replicate. Navin Fluorine is probably the best of the lot.”