In a candid conversation with ET NOW’s Nikunj Dalmia, India’s Big Bull spoke about how he believes that the commodity cycle has turned and how he feels the metal and commodity stocks are still relatively undervalued. Rakesh Jhunjhunwala stated that he believes the metal stocks are undervalued. In fact, he says that the valuation of metal stocks is very undervalued when compared to cement stocks especially.Tata Steel, as per him, is extremely undervalued even at current levels! He stated that the pedigree of Tata Group and Tata Steel is of the highest quality when compared to peers. He believes that there can be substantial upside even now for metal stocks. He further states that going forward, the supply-demand dynamics for the industry will ensure that the prices will stay profitable for the metal companies. Rakesh Jhunjhunwala who made a case for the strong outperformance of Tata Group companies like Tata Motors and Tata Consumer feels that Tata Steel too is a very strong company.
The Big Bull gave an example of Shree Cement that trades 40x earnings, stating that steel companies too deserve higher valuation multiples going forward. He also mentioned that as society evolves and becomes more service-oriented, the component of metals as a percentage of costs is coming down. He believes that there will not be a pinch felt by the consumer if the prices of commodities go further higher. He also believes that the scare and fears of inflation are currently overhyped as inflation will not come overnight but rather comes with a lag, giving enough time for consumers and producers to prepare for inflation. He also believes that within the commodity production basket, the supply-demand dynamics will ensure suppliers and producers will enjoy enough profitability in the years ahead.