SAIL posted its results today.The company's September quarter profit rose 12%,YoY to Rs 543 on forex gain and improved realization. The company's EBITDA margin dropped 190 basis points YoY to 8.9 percent during the quarter. SP Tulsian of sptulsian.com says if SAIL's results are a reflection of Tata Steel's numbers, then they too could post very poor numbers.
Below is the edited transcript of Tulsian's interview with CNBC-TV18
Q: What do you make of the numbers that SAIL reported?
A: These are very poor numbers. Infact, if you compare it on a year-on-year basis, inspite of the Rs 500 crore exchange loss in the corresponding quarter of the previous year and if you see the gain, those are really very poor numbers. Apart from that, if you see the interest income and the interest expenditures, inspite of the netting off, the results are really very bad.
If that is giving us an indication that probably Tata Steel could also post their numbers on similar lines, then those too could be very poor numbers. As regards to SAIL, they have posted very poor numbers.
Q: How would you approach Tata Motors going forward now?
A: There is slight disappointment on the numbers. I am not too convinced with the prices at which it has been ruling, because I have been taking the call at Rs 275-276 or maximum Rs 280 where the profit booking was expected.
In some of the stocks; where we have been seeing irrational of contradictory behaviour like we have seen in the PSU banking sector, inspite of the poor numbers, many stocks have been going up.
It is strange and surprising for me to see Tata Motors ruling in positive today, because I am not too convinced with the numbers. Maybe JLR has really posted good numbers in this Q2, but going forward one cannot be really safe. So, entering into the current level even as a trader in the stock, may be a little risky.
A: I have no hopes from Pantaloon because the operations will continue to be showing losses. However, I will keep my eyes on Orchid Chemical. That will be really a very interesting play.
I am keeping my positive stance on the stock from a longer term horizon. After the company has sold their one of their division, one has to really see what kind of interest burden gets reduced because of that. So, Orchid Chemical will be an interesting play to keep an eye on. However, from Pantaloon I am not expecting any hopes of revival on the operational front.
Q: It seems like the United Spirits deal is now closing in possibly by end of this week. How would you approach United Spirits as a stock before the deal happens?
A: I have been taking a call on this deal happening at about more than Rs 1,500 plus per share for last two-three months. I am keeping my positive stance on the stock and today we have seen the stock touching Rs 1,400. However, one has to see, presuming the deal is likely to conclude in a day or two- what percentage of stake is getting sold by the UB Group, whether they sell their entire 27 percent or whether they sell their 12-15 percent which was earlier envisaged.
I am expecting they will probably sell their 12 percent stake plus 3 percent stake held by the trust; 15 percent and thereafter there will be some preferential allotment because even the debt which is lying in the books of the company to the extent of Rs 4,000-4,500 crore needs to get reduced. Maybe 10 percent preferential allotment to the Diageo will bring down that debt substantially. Once Diageo has 25 percent stake that will be followed by 26 percent open offer price.
So, overall whatever maybe the broad contours of the deal, it is certain that Diageo is ultimately looking for a 51 percent stake in the company. That will vastly re-rate the stock and going forward maybe from FY14 onwards, I am expecting that share to post a consistent performance quarter-on-quarter with annual EPS of close to about Rs 50 plus.
If you really take the call on United Breweries, which is ruling at a PE multiple of Rs 55-60, I won’t be surprised to see that stock also ruling at a PE multiple of Rs 40. Obviously Diageo at the command with the majority stake will get vastly re-rated. So, maybe over a period of next six-eight months, one can expect a price of Rs 1,750-1,800. One should not take the deal only as the trigger to make the shares to move to the level of Rs 1400 or maybe Rs 1450. Overall I have a positive stance, but it will be interesting to see on what lines the deal gets sealed and concluded.
Q: What are your views with regards to Manappuram General Finance? It used to be quite an outperformer in terms of earnings at one point, but post the loan-to-value (LTV) norms it became a bit sluggish. What would your expectations be going forward?
A: I am expecting positive results from the company. I am expecting the EPS for the quarter to be to around Rs 1.95-2.05. If you take a overall call for the whole of FY13, I am expecting the company to be able to close the year with an EPS of close to about Rs 8. The kind of performance which we have seen from Muthoot Finance also indicates that the stock is likely to perform well. So, overall keeping my positive stance on the stock because the share is ruling at PE multiple of Rs 4-4.5. However, for the quarter my EPS estimate is close to around Rs 2.
Q: What are your view in terms of what you are expecting on ONGC?
A: , I don’t think ONGC’s results have any meaning. It all depends on the subsidy-sharing, how much is dumped on the company. It all depends on that. Except for that, the results are likely to be flat, because if you really see the upstream and the oil marketing companies (OMCs), all three quarterly results don’t have any meaning because everything gets adjusted ultimately in the Q4.
So the same thing will happen here. There will not be any disappointment on the operational front, but on the subsidy front, it is very difficult to take a call on what will be the subsidy amount, subsidy-sharing by the company.