Thread by @myvaluepicks

Conference Call Transcript | Prashant Jain, CIO @hdfcmf

1⃣ Economic Overview
- Government should spend more – Infra capex
should be boosted to create more jobs, services and
demand for materials
- Economy likely to be driven by Investments now and not
consumption

2⃣ Banks
- Large banks likely to come out stronger from the crisis
- Lots of value in some of the large banks – some available at
1x book value
- Plus valuable subsidiaries like life, non-life insurance, credit
cards etc.
- Deposits moving to larger banks

3⃣ Oil & Gas
- Primarily #Reliance (12% of the Index)
- Appears to be fairly valued but with strong triggers going
ahead. Currently, market ascribing half the value from
#telecom venture

4⃣ Software
- Well placed; earnings might see a 5-10% decline this year
primarily on cost pressure, pricing pressure and growth
issues
- In tough times, outsourcing increases
- Many companies at attractive dividend yield of 3-5%

5⃣ Construction
- Profits likely to be down by 15-20% this year
- Reasonable order book for the next 4/5 years
- Companies like L&T at #lifetime low valuations
- L&T is now 10x the number 2 player in the sector – many
mid-sized companies have gone #bankrupt

6⃣ Utilities
- Both public and private companies are cheap
- Available at a dividend yield of 6-15%
- Strong businesses, well regulated, low debt companies
trading at a discount to their book values
- Power demand can come back to near-normal levels

7⃣ Consumption / FMCG
- Overvalued
- Discretionary spending/consumption might see a pause,
considering consumption was primarily driven by loans.
Lower-income groups have less savings
- Even white goods / brown goods companies can currently
be avoided e.g. Havells

8⃣ Auto
- At a risk as 20/30% decline in volumes can have a
catastrophic impact on the profits
- Example discussed Eicher Motors

9⃣ What to look for in the businesses to invest:
- Ignore the current year, focus on the next year earnings
- Revert to normal faster than others
- Balance sheets are not at risk
- Business model will not undergo major change
- Fixed costs are less
- Valuations are attractive

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