PSU gains "bizarre", two-wheeler stocks' surge "unsustainable", says Kotak

Cochin Shipyard

08/07/2024 08:49

** There is "disconnect" between stock gains, profitability
across Indian state backed companies like Bharat Heavy
Electricals  BHEL.NS , Cochin Shipyard  COCH.NS , as well as
India's two-wheeler stocks, Kotak Institutional Equities says
        ** Adds, "valuations of many PSU companies are quite
bizarre compared with fundamentals, with several companies
trading not making any meaningful improvement in earnings" 
  
    ** Kotak says market cap growth in BHEL, worth about 778 bln
rupees (about $9 bln) in past year, is far higher than entire
profit pool of thermal boiler, turbine and generator market
    ** Says Cochin Shipyard's 673 bln rupees market cap addition
is way above the best case profit scenario
    ** Adds two-wheeler makers, Eicher Motors  EICH.NS , Hero
MotoCorp  HROM.NS  and TVS Motor  TVSM.NS  added 1.8 trln rupees
in aggregate market cap since March 2023
    ** Says, EICH should sell 3 mln two-wheelers by fiscal year
2035 to justify its valuations; EICH sold 0.9 mln two-wheelers
in FY2024
    ** Kotak estimates HROM would need to sell 16 mln
two-wheelers by FY2035 to justify valuations, HROM sold 5.6 mln
two-wheelers in FY2024
($1 = 83.4400 Indian rupees)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
High market capitalisation relative to profits in India's PSU
companies    https://reut.rs/46ctnWN
India's two-wheeler companies need to post sharp sales growth to
justify current valuations    https://reut.rs/4bCp4F7
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Bharath Rajeswaran in Bengaluru)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))