Today HDIL cracked 13 per cent and was among the top real estate losers. In an interview to CNBC-TV18, SP Tulsian of sptulsian.com said that he has been seeing the profit booking in all the real estate stocks. He believes, specifically in case of HDIL there were a lot of trading positions built and thus the stock has shown good up move.
Tulsian sees HDIL management’s commentary as comforting words and considers that it may not fall further from hereon.
Below is the edited transcript of his interview to CNBC-TV18
Q: What is happening with Housing Development and Infrastructure Limited (HDIL), it is getting smashed right now?
A: No news, in fact we have been seeing the profit booking in all the real estate stocks. If you see the Indiabulls Real also, it has not shown any kind of strength in spite of having posted very good numbers.
So, overall the profit booking has all been seen across the board whether it’s any stocks Peninsula Land, Anant Raj Industries or Unitech. However, specifically in case of HDIL there were a lot of trading positions built. The stock has shown good up move.
It’s difficult to pinpoint whether this is the liquidation of the trading position, long positions where the stop losses are getting triggered. This must have been put at various levels or is there any specific adverse news in respect to the company.
Q: Would you consider smaller companies like Ajantha Pharma or a Sasken Communication which have come with good set of numbers?
A: Definitely, Ajantha Pharma has posted very good numbers. They have shown an Earnings Per Share (EPS) of close to Rs 14 for the quarter. I do not know the status now, but it was frozen upwards 20 percent.
This is not the time to buy the stock, but in respect to the Sasken there has been no consistency. One can compare the performance of the Sasken more on the lines of Polaris. There they have shown two good quarters and two bad quarters.
So, I will definitely remain away from Sasken and Ajantha Pharma. I will not be looking to buy this stock at these levels.
Q: Do you expect a Syndicate like performance being repeated in few of the other mid-cap banks or do you think Syndicate Bank is an isolated performance?
A: I think that Syndicate looks to be an isolated performance. I don’t think that this kind of performance can be expected from any other bank. There are some weak PSU banks, like Indian Bank or Vijaya Bank. There performance has not been very good lately. However, one cannot expect this kind of slippage happening in respect to any other PSU banks.
Q: Bharti Airtel is up about 4 percent odd. There is no real change in the headline tariff. After what came out from the management, do you think there would be any impact on the margins?
A: I am too positive on these stocks. The run up which we have seen in anticipation of the tariff hike, it has not come on the expected line. Whenever we see such trading grip having started, much ahead on the expectations of these news flows it remains positive for quite sometime.
Like in case of Tata Motors, where people took very bullish call with a target of Rs 380-390 aand now started correcting. Same thing is happening in case of Public Sector Undertakings (PSU) banks.
I hold the same view in respect to the telecom stocks also. If one really sees Bharti and Idea, they have really moved much ahead of their performance. In spite of the fact that Q3 is generally a better quarter for the telecom companies, I think the valuation seems to have quite stretched for Bharti at this stage.
Q: What is your reaction to JSW Energy, is this good set of numbers?
A: As you have rightly said it is all because of the control on the feed cost. It is very difficult to take a call that at what rate the coal has procured. Earlier because of the higher fuel or coal cost, all these companies used to operate at 80-85 percent.
This fixed cost component is very high in case of the power plant. That is seeing the improved bottom-line. However, in spite of that whatever gain or whatever efficiency we have seen coming in must have come in. In respect to the one item that is the raw material or the feed stock of the plant.
Q: JSW Energy is up almost 70 percent since the start of 2012. Where do you see it go from here? Would you buy it now?
A: I think their Barmer plant is based on the lignite. It must have given them the better efficiency. Although we are taking an average of the raw material cost of their all plants put together and seeing a down of about 4 percent on the raw material cost.
Last week also I have said that I am holding my positive view on all power generation companies. They are virtually ruling at its low. So, considering all this, investment call can be taken on the stock. Due to the better Plant Load Factor (PLF), which I expect to remain above 90 percent plus.
Q: What did you make of the HDIL managements commentary that we just heard and how you would approach the stock now?
A: Definitely comforting words. The confirmation has come that they have officially intimated that they have sold about one percent of the equity. However, my only worry is that this will give them about Rs 50-55 crore.
The substantial value will get added to the working of the company or maybe to the land bank is being said. So, is that Rs 50 crore substantial or whether that is a first tranche? As heard, since the payment has fallen due that has to be funded. That means they were hard pressed even for Rs 50 crore.
One can look from both the angles. Firstly, the clarity has come in respect to because you start speculating. Whether there are any kinds of pledged sells being made which will continue on a continuous basis by the lenders or are there any bankruptcy or are there any kind of regulatory moves by the authorities on their projects.
All those come to a rest. Going forward I don’t think that further weakness is seen. In fact I am seeing this as comforting words from the management. It looks favorable for the stock. It may not fall further from hereon.
Q: After seeing Sun TV and Zee Entertainment numbers, would you be a buyer?
A: Yes I will be buyer in both the stocks. Their performance and the guidance has been quite robust. They have also shown consistent up move. Similar is the case with Sun TV. Both the companies have shown a PAT of, Rs 190 crore for Sun and Rs 193 crore for Zee Entertainment.
If one takes a call on Zee Entertainment, going forward no worry on their sports channel losses that keep curtailing the trajectory and the future seems to be quite robust. So, it’s a positive call on both.
Q: What about L&T, after last quarter strong performance what is the expectation this quarter around?
A: Definitely Q3 is always better than Q2. I am expecting that this time probably the EBITA margin on their ENC construction business will be somewhere close to about 11.5 percent. As in Q2 they had some exceptional gain, which had seen their PAT or maybe the bottomline going up. However, I am expecting their EBITDA to be close to Rs 1500 crore plus.