In an interview to SP Tulsian, sptulsian.com shared outlook and trading strategy for stocks across various sectors.
He suggests investors and traders to stay away from HMT because there is no fundamental reason for the stock to perform well in spite of government’s plan to infuse capital in it.
He sees the Reliance Globalcom deal as a positive for Reliance Communication and expects the stock to move to about Rs 96-98. "Although it may not be able to breach the three digit mark very easily,” he adds.
Meanwhile, Tulsian is not so upbeat on March quarter results of Ultratech Cement because of the hike in diesel prices, but he expects its profit after tax (PAT) to grow to Rs 640-645 crore.
Below is the edited transcript of his interview on CNBC-TV18
Q: A package is finally through for HMT, how have you read it? Any longer term ramifications for the stock aside from the immediate rally it may see?
A: I see that amount going down the drain. They have given ambitious plans that the Rs 1000 crore plus infusion can turn the company profitable in next five years. They have also said that production ramping will go up by five times but I don't think that will happen.
If one looks at the history of three-four companies like ITI, HMT, Hindustan Organic Chemical, Madras Fertiliser, these companies have never been able to scale up in spite of government being after them for over last five-seven years. So, sometimes I wonder when the government has been so wise in mobilizing Rs 200-300 crore from offer for sale (OFS) or part stake sale in the companies like Rashtriya Chemicals and Fertilisers (RCF) how they just doll out Rs 1000 crore for these companies.
Earlier the government had planned that one-two divisions of the company would be sold out of the five-six division; to sell the real estate but because they were unable to succeed in that, I think this has been done.
However, I don't have any hopes. Although in the near term or in the short-term, the stock will see some upside but that will add to the woes of the retail investors or traders because they all jump and buy the stocks at the upper level and remain stuck in those stocks at those prices.
My advice and caution is to stay away because I do not see any fundamental reason for the stock to perform.
Q: How do you approach Reliance Communications (RComm) now that stock has moved from Rs 60 to Rs 85 in the last two weeks, since there is a confirmation of the deal getting done by the end of May? Would you put more money into this stock and do you expect this deal to get done at higher valuations than you had suggested earlier?
A: The Reliance Globalcom deal is likely to happen but I don't think it is likely to happen beyond USD 1.2 billion because of the indications that are coming. To add to the positive, I am expecting something to happen on Reliance Infratel also because the kind of arrangement they had with Reliance Jio, something must be happening in respect to the monetization of that stake also. And from that, company can mobilize USD 3 billion plus in the next three-four months or in a little longer timeframe.
So if the market has these kind of indications then definitely that will be seen as quite positive. The company can bring down their debt by about USD 3.5-4 billion, which will be seen as quite positive. Once hope starts building up then that will keep the momentum on.
In this process I expect that stock to move to about Rs 96-98. Although it may not be able to breach the three digit mark very easily but Rs 96-98 can be expected in 10 days looking at the kind of delivery based buying seen happening in the stock for the whole week gone by.
Q: Ultratech Cement is the first cement company to announce numbers today. It doesn’t look like it is going to be a pretty set of numbers this time around. How would you approach that entire space and Ultratech in particular?
A: Generally, the March quarter results are always good for the cement companies but I don't think this time it is going to be same because of rise in diesel prices. Now they are paying bulk cost being bulk consumers. So, overall the results are going to remain quite subdued.
However, on a sequential basis I am expecting that the company may show some growth, maybe Rs 5000 crore plus top line, Rs 1400 crore of EBITDA and profit after tax (PAT) of about Rs 640-645 crore. In Q3 they had a PAT of about Rs 600 crore so they may be able to post a 6-7 percent growth in PAT.
Overall the realisations have been better in central, northern and southern part. In western part the realisation was a bit subdued may be because of some import from Pakistan. Overall Rs 640-645 crore should be the PAT for Q4.