Kotak Institutional Equities sees flaws in valuation practices in Indian markets

Suzlon Energy

05/12/2023 09:26

** India's Kotak Institutional Equities sees valuation
issues in construction materials, specialty chemicals, capital
goods and pharmaceuticals sectors on exaggeration of fair values
and understating potential risks to business models 
    ** Says markets' valuation methodology of using high P/E
(price-to-earnings) multiples to value high growth but capex
intensive businesses is "careless" 
    ** Adds markets' practice of according valuation multiples
to "limited-opportunity" earnings businesses like pharma and
capital goods make little sense, as these earnings are
non-recurring
    ** Kotak says increase in market capitalisation of companies
like Bharat Heavy Electricals  BHEL.NS  and Suzlon Energy
 SUZL.NS  are far ahead of the likely value creation over next
several years
    ** Says markets ignoring high capex while rewarding growth
in construction materials and specialty chemicals
    ** Expects profitability in auto sector to come under
pressure due to large disruption risks
    ** Estimates Hero MotoCorp  HROM.NS  to more than double its
two-wheeler sales by FY34 from FY23 levels, to justify current
stock price

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Key disruption themes for India's consumer sectors    https://tmsnrt.rs/3TbSLY3
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 (Reporting by Bharath Rajeswaran in Bengaluru)
 ((Sethuraman.NR@thomsonreuters.com; (+91 9945291420); Reuters
Messaging: nallur.sethuraman.thomsonreuters.com@reuters.net))