'No reason for long-term investors to sell ITC' | Economic Times

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. Edited excerpts from an interview: Many brokerages have increased their price targets on SBI. What is your own sense on how scalable SBI can be in the next one year?Frankly, if SBI does not perform then the index numbers in terms of earnings has 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 for 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. 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.What is your own take on what should long-term investors do with ITC?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.Cement companies have shown a decent growth in volumes. Most of them have delivered stellar growth in their Q4 numbers. Is this track record sustainable?Cement sector is probably going to continue doing reasonably well largely because the construction cycle has turned positive. Unless the government moves back on its promise of pushing a lot of money into infrastructure, there will be a lot of demand for cement going forward.The real challenge is that most large companies have announced a strong increase in capacity. This means that there will be some pressure on capacity utilisation. I think the profit growth will continue to be reasonable. Many of these stocks have have done quite well. There is perhaps a little more headroom that you may get from here. But if you are looking top down, then obviously your best picks are the largest companies like UltraTech Cement.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 Flourine is probably the best of the lot.