Mayuresh Joshi’s top two stocks for 3x-4x growth in five years

"Base case scenario getting worked out that the first half of the next financial year, earnings should start bottoming out, reflecting in probably the spread narrowing as well," says Mayuresh Joshi, Head Equity, Marketsmith India.

The question which we are debating, deliberating, and discussing is that do we have a durable trading bottom in place for the market now and it will take a lot of global bad news or local events to break that recent low.
Mayuresh Joshi: We have been analysing a lot of aspects, including how the gap between the bond yields and the earnings yields have probably panned out over the last 10 to 15 years and in terms of this narrowing of spreads, we are below the long term averages.

So, to a certain extent the market is trying to pencil in that earnings should start reviving at some point of time as we head into the first half, both as a combination of better monsoons, aiding global recovery, and consumptions improving because of the tax cuts that we have probably seen.

So, base case scenario getting worked out that the first half of the next financial year, earnings should start bottoming out, reflecting in probably the spread narrowing as well.

The second aspect obviously has been in terms of the previous and the past corrections as well and the periodicity of this correction, obviously from oversold zones, we have probably come back to a large extent, but to a large extent as well all the previous falls that we have probably seen, the kind of battering that has happened across this fall in midcap space, the kind of fall that we have probably seen in terms of price damage, selectively a few pockets within the midcap universe have started probably looking attractive.

And last but not the least in expectations of Trump tariffs and tantrums as well, what probably happens in terms of global economy, global inflation, core inflation itself, and the interest rate cycle, the markets have pencilled the worst probably in and therefore within the emerging pack India's earnings should start bottoming out, India's macro is probably better than the rest of the emerging economies, and therefore India should do with the bottom is in place.


What is your view, especially on this entire theme, the renewable energy theme, the fact that the government push and the impetus is on that particular domain out and out, what is your take on that and which stock do you like in that space if you do that is?
Mayuresh Joshi: So, two aspects. The intent of the government is obviously there because we need to get the renewable capacity to 500 gigawatts over the next few years and a large addition of that will be solar. But hydro and hydel plants, specifically small hydro plants might do exceptionally well, in my opinion, again in specific areas of operation itself and therefore, a lot of the equipment manufacturers or the EPC players for either solar or hydro or renewable as a space might actually do well.

The second part of the equation is also the flue gas desulphurization players. Because as we head over the next few years and the deadline has obviously been extended till March 26, maybe it gets extended one year more, but that is a one lakh crore market out there, only 10,000 crores worth of orders have been out, very few players that can actually make this equipment so that the existing thermal plants do not pollute and therefore, looking at the climate emission norms, this segment of the market along with renewables, specifically the small hydro that I was talking about, can actually do well.
So, within the players, players like Techno Electric, as an example, has a good mix in terms of FGD equipment, smart meters and therefore, they are in the right spaces as far as government capex layouts is concerned.
Obviously, with the correction that we have probably seen, we would like them to make good sound bases. So, these two spaces might actually do well as far as energy as a space is concerned over the next three to four years.

There is this debate which says that everything which moves on wheels will be electric. There is a debate which says that everything in future will not be EV. Maruti is saying that I will do hybrid, Mahindra is saying that I will still roll out EV. Who will be the winner in this entire EV space? I mean, there was once upon a time we thought Ola is the ultimate EV company. Today, it has gone to Rs 45. There are so much of yes, no, I do not know in the entire auto EV space. Who will be the winner?
Mayuresh Joshi: So, honestly, over the next few years, electric will dominate. At what time periodicity very difficult to say. I was going through a global auto report, which is probably seeing signs of stagnation probably happening, even as far as the electric market is concerned, whether it is Europe or even North America to a large extent and therefore the adoption, obviously, with respect to pricing, with respect to infrastructure, largely related to charging of these vehicles, and the changes that happen in terms of both batteries as well as the powertrains, as well as electric vehicle platforms are concerned are going to be very-very evolving.

So, the kind of R&D spends that have been done and are being done, there will be significant amount of incremental capex that will keep on as technology is evolving.

Having said that, specifically for a market like India, we are still evolving as a space and like power, where we are not directly going to go into renewables over the next few years, thermal will still stay put, even for automobiles the electric engines will obviously take precedence over the next few years but that will be restricted to certain urban markets.

In semi-urban and rural areas, it will still be the internal combustion engines, the petrol and diesel cars that we are talking about, the hybrids, that will come to the fore and therefore, a stock like Maruti, just as an example, which probably has a clear cut advantage both in terms of creating hybrids in terms of electrical mobility platforms as well and internal combustion engines with very-very attractive price points, the dealership network that they have got, the service stations that they have got, and after sales services as well might actually benefit in the Indian ecosystem.

So, when Tesla comes in certain urban pockets might do well or the M&M launches that we have probably seen, but consistency over the longer period of time Maruti has the right mix, in my opinion, to cater to all these segments over the next few years.


You never told our viewers to buy Jubilant FoodWorks. Why it is that you never told our viewers to buy Jubilant FoodWorks? Just buy a pizza company and keep it. 24 times in 15 years.
Mayuresh Joshi: There have been phenomenal moves. No two ways about it. But the important crux now here is that the changes are happening very-very fast and evolving very-very fast as well. So, the modes of delivery are also going to be very-very important as far as a lot of these consumer chains/consumer discretionary.

What are your two stocks for minimum five years but the condition is that it should be at least 3x to 4x in five years, that is a reasonable time frame?
Mayuresh Joshi: So, Kotak Bank, out of the large names, our take is that there should be decent growth that probably happens as far as banks and financial institutions are concerned. And in our own estimates, Kotak can actually deliver significantly as far as most parameters that banks normally do. So, whether it is advances, growth, reasonable amount of deposit growth, stable NIMs, asset quality and credit underwriting should be top-notch.

And again, in terms of the return ratio, it should be right there at par with the best banks in the world. So, our own sense is that Kotak might actually deliver phenomenal numbers over the next few quarters and years, that is the largecap name that we probably like in terms of ratings and rankings.

Out of the midcap space, Welspun Corporation is something that we continue to like over a long period of time. Two reasons out here.