2 stocks which could be compounders for next 2-4 years: Sandip Sabharwal

“I am very optimistic on Indian Hotels. It has gone up so much, it might consolidate for some time but I think in the next two-three years, new hotel additions will be very, very muted, pricing power will be there and some of these hotel chains will do very well, says Sandip Sabharwal of Asksandipsabharwal.com.

Is PVR a candidate for more surprises with each quarter passing by?
That will happen in many of the reopening trades because one big factor is that in these two years of shutdowns, many of these companies have optimised their costs so much that they have cut down their fixed costs substantially. So, whenever the revival cycle comes, the improvement in profitability will be much better than expected, as we found in the third quarter results also for Inox and PVR.

Both PVR and Inox over the next 2-4 years will continue to be compounders from here because cinemas do not face the threat of what cable TV etc faces due to OTT platforms etc. Outgoing experience and outgoing sales will only grow and their pricing power will improve as the economic prosperity improves and it has become more of a duopoly now, Many of the single cinemas have just shut down and so besides Inox and PVR, there are a couple of other chains which are unlisted but then that is about it.

I think we are in for very good times for these companies over the next two, three years. They will take some correction in their stride if the overall market corrects. Very good returns will be made in both these stocks over the next two years.

Last year, we saw revenge shopping as malls, restaurants opened up in last quarter – October-November-December. This time, business travel has started, business trips have started, normalisation is happening to business more than retail. As business is normalising in terms of communication, travel, commuting and factory visits, is there a trade anybody could bet on?
Not directly because there are sub elements in the airlines you play or hotels you play. Unfortunately all these Uber, Ola etc are not listed at this stage but then they would have also fallen a lot if they were listed in India and then they could have become a good play for the revival. But that play is not there. I still believe most of the good hotel chains have optimised their costs a lot. I am very optimistic on Indian Hotels. It has gone up so much, it might consolidate for some time but I think in the next two-three years, new hotel additions will be very, very muted, pricing power will be there and some of these hotel chains will do very well.