SAIL can be a turnaround story: Yogesh Mehta | Economic Times

Yogesh Mehta, Founder, Yield Maximisers, is bullish on both SAIL and Tata Steel. He says that SAIL could be a turnaround story because of the way they have reduced their debt levels. Edited excerpts from an interview: Where within the cement sector you are finding comfort to buy afresh?Cement has been the preferred sector since the last two quarters for me. I am looking at the largest player, which is UltraTech Cement. The valuation gap between mid-sized cement and the largest player is quite huge. UltraTech is a dominant market player and so there is a strong room for upgradation. In mid-to-large segment, there is Ambuja Cement where the dispatch numbers, EV-to-EBITDA and EBITDA per tonne ratios are not so much on the premium side. So there is further headroom in Ambuja Cement also. I think Ambuja and UltraTech are the two names where one should look at. How are you looking at metal stocks?Tata Steel's debt level has reduced, the EV-to-EBITDA level is also showing a good uptick and there is still some more demand left globally as well as domestically. Tata Steel may have some upside headroom of 10-15%. Sustainability would be visible further after two quarters.There can be a turnaround story in SAIL. The way they are reducing their debt levels, a re-rating could be on the cards. SAIL is more preferable than Tata Steel. I would like to have these two names within the commodities pack.What is your outlook on largecap banking stocks as well as NBFCs?There are no doubts to get into largecap private sector banks at current prices. They are commanding a premium over PSU banks but there is no comparison at all. Look at the way HDFC Bank and Kotak Bank have managed their balance sheets in pandemic situation, especially the way they have maintained their key financial ratios. NBFCs have maintained their AUM in a controlled manner and private sector banks have managed their books with controlled NPA levels. I would prefer HDFC Bank, Kotak Mahindra Bank and ICICI Bank because of their clean balance sheets and regrouping of their own numbers. On the NBFC side, there is a sign of caution after the second wave. I would prefer to stay back and wait for one or two quarters.What is your view on MFIs after the Assam government announced relief on MFI loans?The development in Assam is positive but that is not the only problem. If we look at the overall balance sheet of Bandhan Bank, then the credit cost is getting higher and higher. There were days when they were enjoying at least 10% NIM after the IPO but now it is getting tapered off. Overall, the stock price of Rs 340-345 leaves very little headroom (for upside). I think it should remain in consolidation from Rs 300 to Rs 370. I would avoid Bandhan Bank for the next one or two quarters.