Sandip Sabharwal stocks: EV valuations need reset amid global slowdown, says Sandip Sabharwal

“Longer term I would still think that the EV penetration will only keep on growing. In the short term, we have this rare earth magnets issue and risk of a slower adoption, so those risks are there. But for over a 5, 10, 15-year horizon, the EV penetration has to become much more significant,” says Sandip Sabharwal, asksandipsabharwal.com.

I wanted to have your take on Paytm because just yesterday we saw almost 7% to 8% fall on that particular stock and that was after the official clarification coming in from finance ministry saying that the claims that the MDR will be charged on UPI transactions are completely false. Yes, of course, finance ministry has tried to clarify this news before as well, but this time this official clarification really impacted the stock quite hard, almost 8% cut already. How do you see this news flow and can it fall further?
Sandip Sabharwal: So, these rumours keep on coming up on a continuous basis about these charges getting imposed and every time they have been denied. So, they got denied once more. So, I do not know who are the people who keep on spreading these rumours and based on that stock prices move. Paytm overall as a business model which is under threat and to that extent the recent rally in my view incorporates most positives which could be playing out for the stock.

I know when you had the news of UltraTech and Adani is entering into the cables and wires segment, you did see a fair amount of correction pretty much across the board in this sector and I remember chatting with you also about this where you continued to believe that that fall was a good accumulation or buy point for some of the wire and cable incumbents. What is your sense right now on how things are positioned within the sector?
Sandip Sabharwal: Stock corrected substantially, but they have bounced back also. Now, the entry of a large player obviously could be disruptive, but it will not be as disruptive as it was in paints because paints was the organised sector. There were only few players and the impact was much more. Here cables and wires is very sort of diffused kind of sector. So, the impact will be lesser, but the impact will be there.

So, we obviously cannot give the same kind of valuation which these companies were enjoying a few months back. After the bounce back, valuations are now either in fair zone or some stocks are above fair value. So, this would not be the time to get into these I would think.

I also wanted to have your take on some of the EV plays in India and the reason I asked this because globally the EV road map is seemed to be hitting a road block rather because back in US we see that Donald Trump may be coming out with its big beautiful bill and Elon Musk has been quite vocal about it. In China, we are seeing the companies cutting their prices like anything. And back home though, it has a great opportunity of growth in terms of the market share, but the fact of the matter is that the sales are not holding up. Do you believe time to reset the premium valuations that these companies used to hold?
Sandip Sabharwal: No company is pure EV in India. So, I do not think companies because of this are at premium valuation. Longer term I would still think that the EV penetration will only keep on growing. In the short term, we have this rare earth magnets issue and risk of a slower adoption, so those risks are there. But for over a 5, 10, 15-year horizon, the EV penetration has to become much more significant.

And you think M&M is the best position for that?
Sandip Sabharwal: M&M overall as a portfolio is well positioned both in terms of traditional ICE, the recent EV launches, as well as the farm equipment segment which should do very well over the next two years. So, they are present across, so across the board they are doing well, so that is the positive part.
What about the two-wheeler plays though? What is your preferred list of stocks there?
Sandip Sabharwal: Two wheelers, on valuations I like Bajaj Auto because it has corrected substantially, the domestic market for them was not doing as well but could see some recovery, exports are doing well for them and their takeover of KTM has an option value. So, the downsides because of that is limited, but if they can actually turn it around and make it profitable, then it could add significant value over the medium term. So, I think that is one optionality which has recently come in.