Better to avoid PVR, some of two-wheeler cos now: Hemang Jani

We do not know how strong the travel restrictions could be. We do not know what could be the collateral damage on hotel stocks or tourism companies. But one thing is sure that the world has learnt how to live with the virus. Is it a good time to revisit Indian Hotels or any other travel and tourism companies or aviation stocks?
There has been a steep price correction ever since we heard about the new Covid variant. We really need to see in terms of incremental data, when it comes to airlines, how things pan out. For example, 80% of the revenue of IndiGo is from domestic airline travel income, only 20% is international and anyway the market and analysts had not factored in a significant up move in the international income part. So if IndiGo corrects another 5-10%, it may definitely provide a good entry point.

Similarly for hotels, we need to keep a close watch on occupancy rates and if there are any cancelations due to this new variant, etc. If we do not see any big negative data points, these stories will give good entry points — be it Indian Hotels or to some extent PVR. The only thing that I would like to talk about is that recently when I went to a movie theatre PVR, the occupancy was extremely pathetic even for the new releases. Of course, maybe the movies were not good but PVR is something that I do not think will give you that big upside. But names like IndiGo, Indian Hotels can provide a good entry point.

Hero MotoCorp is at a 52-week low. It is a company which needs no cash to grow though it still has a formidable market share. Do you think somewhere this entire hullabaloo over launch of EVs is getting overstretched? Is Hero MotoCorp a contra buy?
I do not think so because we think that this two-wheeler company was very highly dependent on normal engine parts and though they have been talking a lot about EVs, a few guys have already rolled out their products and they are out there to grab the market share whereas most of the incumbents are just making some noise about their plans and what sort of investment they are planning to make.

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When it comes to technology and disruption, the early mover takes away the market share and then it becomes far more challenging for the incumbents to regain that traction and their mojo back. Apart from that, there is a question mark over growth in two-wheelers as a space. The last six months’ data has not shown any growth and when we talk to people at the ground level whether it is dealers or urban or rural, we are not getting a positive traction indication at all.

So we continue to stay away from the two-wheeler name though they have corrected and have good cash flow, etc, but the market gets more excited about the growth or the delta change in the growth more than the valuation, etc. In that kind of scenario, we would be more comfortable buying a Maruti or to some extent some of these auto ancillary companies where we see a bigger growth potential compared to the two-wheeler companies.