Dipan Mehta, Director, Elixir Equities believes investors should stay selective in the current market environment, with opportunities emerging in sectors linked to power infrastructure, export-oriented manufacturing, and speciality chemicals, while caution remains warranted in overheated pockets such as hospitality and select data centre plays.
Speaking to ET Now, Mehta shared his views on a wide range of sectors including data centres, hotels, tyres, transmission & distribution companies, and speciality chemicals.
KRN Heat Exchangers: Strong Story, Expensive Valuation
On KRN Heat Exchangers, Mehta said the company continues to enjoy strong investor interest because of its exposure to the data centre ecosystem, a theme that remains in sharp focus globally.
“See, I think that KRN is one of the best place on the data centre, that is what the street kind of evaluates, which is why it is treated at this kind of a multiple. But the story is pretty much well discovered and, of course, the numbers also will come through pretty decently over the next few quarters but the valuations are a bit challenging and from that point of view a fresh investment does not make sense but existing investors can remain invested.”
He added that India still has very few listed companies offering direct exposure to the data centre opportunity, which explains the premium valuations being assigned to ancillary players supplying equipment and products to the sector.
According to Mehta, investors should watch for corrections before considering fresh entry points.
“At corrections 5-10%, 15% lower one could look at it in a more positive light.”
Coal India: Cheap But Waiting for Growth
Discussing Coal India, Mehta described the stock as inexpensive but lacking meaningful growth momentum.
“And Coal India, see Coal India is cheap, everybody knows that, but look the volumes just do not scale up. I mean, if you look at 10-year volume, 15-year volume, it is just kind of static and it is supposed to be a very important company.”
He noted that investors may continue treating Coal India as a utility-style dividend play unless the company delivers a structural acceleration in growth.
“If there is something happening in the company materially which results in the growth rates going to like 12%, 13%, 14% or so, then even if the stock price has gone up one could jump into it because then you would have earnings growth and PE derating.”
On the company’s offer-for-sale discount, Mehta said the pricing appeared reasonable given the size of the issue and prevailing market conditions.
“I think that it is okay and 10% discount is not something which investors should not mind. It is a typical discount and maybe retail investors will buy it like in a form of a bit of arbitrage and some investors may also buy this and short in the futures market.”
Hospitality Rally Still Intact, But Caution Emerging
Mehta acknowledged the remarkable run seen in hotel and hospitality stocks since the pandemic, citing names such as Indian Hotels Company, Lemon Tree Hotels and newer listings in the sector.
“So, by and large hotels have done really well last two-three years, I think since COVID hotels have done very well right from Indian Hotels to even some other newer listings Lemon Tree, Ventive Hospitality, Leela, all of them have done very well.”
However, he warned that geopolitical uncertainties and a possible moderation in travel demand could create near-term pressure on the sector.
“So, I would be a bit cautious. It is like a running train, I would advise remaining invested but from a fresh investment perspective just kind of wait and watch.”
Mahindra Holidays: A Perplexing Underperformer
Among hospitality names, Mehta singled out Mahindra Holidays & Resorts India as an outlier that has failed to capitalise on the sector’s boom.
“That is what I said that it is very perplexing that the entire hotel industry has gone into great high growth phase but Mahindra Holidays has generally been reporting very poor set of numbers, flattish type of growth rates.”
Despite praising the company’s resort network and locations, he questioned the productivity and monetisation levels being achieved by the business.
“It has got a fabulous business. It has got a fantastic kind of a chain of resorts at the right location, but I do not think the productivity in terms of what they can earn from these resorts has reached its potential level.”
Tyre Sector: Balkrishna Industries Stands Out
Turning to tyre manufacturers, Mehta said most companies in the sector have delivered healthy results, aided by softer rubber prices, though margin pressure tends to emerge whenever raw material costs rise.
“It is also a highly competitive industry and I would say that it is pretty much well discovered and well valued at this point of time in terms of PE multiples.”
Among the tyre makers, he highlighted Balkrishna Industries as a company worth tracking closely because of its export orientation and strong positioning in off-highway tyres.
“The real company to watch out for over here is Balkrishna. It is a company in which we have invested in so our views could be biased.”
Mehta believes the depreciation of the rupee could support exporters such as Balkrishna Industries, especially as the company expands its product range and backward integration capabilities.
“So, I am keeping a watch out for it and at some point of time all the efforts of the management should bear fruit and they will go back to that earlier growth rate which they had delivered in the past.”
Power Transmission & Equipment: A Structural Opportunity
One of Mehta’s strongest sectoral calls remains the power transmission and equipment space, where he sees multi-year growth visibility driven by India’s renewable energy ambitions.
Referring to companies such as KEC International, Kalpataru Projects International and Transrail Lighting, he said short-term earnings fluctuations should not distract investors from the long-term opportunity.
“So massive transmission of power has to take place and India is going from 283 gigawatt to 500 gigawatt over the next three-four years in terms of renewable energy.”
He also highlighted opportunities across transformer makers and HVDC-linked companies, including multinational players such as Hitachi Energy, GE Vernova, Siemens and Bharat Heavy Electricals.
“So, I would say overweight on the entire power equipment industry because massive investments are taking place and are required and it is being pushed by the government as well.”
Speciality Chemicals Emerging as a Preferred Bet
Asked about the most attractive pocket of the market currently, Mehta pointed toward speciality chemicals, particularly export-driven businesses.
“No, we are looking more and more speciality chemicals and again, as I said, in our investment theme of export oriented businesses that is something which we are seeing kind of breakout quarters taking place over there.”
His comments indicate a growing preference for sectors that can benefit from global demand, currency depreciation, and India’s expanding manufacturing competitiveness.
