In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on specific stocks and sectors.
Below is the verbatim transcript of SP Tulsian’s interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Sonia: I wanted to first start by chatting about BEML because that is really the stock of the day. On this 26 percent divestment, how much more would you give it in terms of near term upside and how are you positioned on the stock for the longer term?
A: I don’t think that there is any point in taking a near term view because whatever near term has to happen, one can expect still the stock to move up maybe by about 5 percent or so in the next or probably in this week itself. However, if you take a call on the stock, I think this is extremely positive. 54 percent of the government of India’s stake which has always been enjoying a very good product line and the market share but they have not been able to accelerate the profit margins or maybe once the induction of a strategic investor comes in, with a stake of 26 percent in which the government will be holding 28 percent, so, it will be seen as a joint venture company and the government will continue to hold the 28 percent and we have seen the fortunes of many such companies having changed dramatically.
So, yes the growth will be seen in the profitability which will lead to the sharp increase in the price to earnings (P/E) as well. So, increase in the earnings, increase in the margin, increase in the P/E. However, yes, for the near term, you can expect the stock to move to a level of maybe about Rs 1,200 in this week or if not in this week at least in this series. So, I am keeping a very positive stance and in fact this indicates that government is very proactively considering either a strategic sale outright or maybe the induction of strategic investor, strategic promoter as a joint investor in many of the companies, so, yes, highly positive on BEML.
Anuj: The other stock of the day today has been Biocon and of course it was one of the strongest stocks but it corrected a bit but within one month it is almost back to its previous highs. Is this risk reward still favourable here?
A: I have been saying this for a while about maybe two to three months that I am not keeping a positive view on the pharmaceutical stocks. If you see the trading pattern of Biocon, this has been for the last maybe couple of months -- I agree that in this last one month, the stock has moved up maybe by about Rs 100-150.
However, if you see, this stock has been correcting and then again the renewed buying interest coming back into the stock. So, I am not seeing any fundamental reason which can justify the stock to move beyond a point or maybe that level at which it is ruling now. So, I won’t be taking a positive call or maybe giving a buying advice now in the stock at the current level.
Anuj: We have discussed this topic in the past as well but I wanted to reiterate for our viewers, your thoughts on the housing finance stocks. Dewan Housing Finance (DHFL) and Indiabulls Housing Finance both are up 2 percent in trade.
A: Last week when the stocks corrected in the fear of this sharp rate reduction or maybe the interest rate cuts seen from across the board, from all the banks. At that time also I have said that pie of housing finance companies will increase substantially and the kind of reach these all housing finances companies are having and if you see the average ticket size, for instance DHFL is having an average ticket size of maybe about Rs 16-18 lakh and that is giving them a very strong edge.
I don’t think that the PSU bank can really eat the share of all these companies. We need to wait for LIC Housing Finance, the first quarterly numbers which will be out; I think it is either on January 13 or January 16. So, if you take a call, in fact all the housing finance companies will really going to enjoy to a great extent. I am not taking a near term view because as such if you take a near term view, I don’t think that any impact is going to be seen either in case of interest reset of old loans or maybe the immediate impact on their lending cost or cut on the net interest margin.
So, keeping a very positive view and because taking the same view, I am keeping positive stance. In fact my preference of picking the stocks in this space would be DHFL, LIC Housing and Indiabulls Housing Finance; three stocks are looking quite good.
Anuj: I also wanted your thoughts on Coal India; that stock has disappointed a lot of investors but it is now trading sub Rs 300. Any call here?
A: I have been keeping neutral to negative call on the stock. I will continue to do so in spite of hearing from the government, may be the secretary level and all that the production is very much on the track and ambitious target of the production has been given by 2020. However, I won’t be taking a positive call on the stock because it has not been seen a performer even if you take a call for the last maybe 12-18 months or so.
Anuj: You have had your picks in the NBFC space, but L&T Finance in particular, what is driving this rally that we are seeing from the recent lows?
A: If you see Mariwala who is an independent director of the company, I am not saying that I am not keeping a positive view on NBFC and NBFC stocks or maybe L&T Finance in particular but Mariwala being an independent director having bought the shares of the company, since then it has been seen moving up. So, maybe if I need to pick and choose, probably L&T Finance may not be on my buying list now in spite of keeping a positive view on the NBFC space because having run by about maybe 12-15 percent in the last couple of weeks.
Sonia: Any thoughts on Max Ventures and how to approach it ahead of the board meeting today?
A: Max Venture I am keeping a neutral view because either you take a very long term call for two years -- I am not saying that I am not convinced with the business model and all that so either you have two years view or you just give a pass to the stock.
Anuj: I wanted your thoughts on sugar stocks, of course you started recommending these stocks when they were 20 percent of what they are right now and they have been three or four baggers since then. However, do you get a sense that this cycle has some more legs to go, the sugar cycle and would you still be positive on names like Balrampur Chini, Dalmia Bharat, and Dwarikesh Sugar?
A: If you just see from post demonetisation, November 8, in fact I am trying to draw the attention on November 18, the UP government has declared the State Advised Price (SAP) at Rs 305 and post that I have again started giving a buy call. In fact in 2017 five gems, my one of the idea was Rs 290 Dwarikesh Sugar.
If you see from May 18 to now, all the sugar stocks, I am using the word all the sugar stocks, about there are 30-45 sugar stocks have risen by 20 percent to 45 percent with Dwarikesh Sugar as the highest taking 46 percent gain in this period. Actually I think that the people have not understood the sugar rally still because I have been given two of the triggers. Yesterday in fact there was a release that Maharashtra has started seeing the closer of the mills, 30 mills have not started in that period and actually this is a huge positive.
The global sugar prices have started rising. Only if you see some kind of negatives which can come in, in the form of maybe that government may contemplate importing sugar at a zero duty and all that and even at a zero import duty things will not work against the sugar mills because if you see the production is not going to be 215 lakh tonne for this season. So, I am still keeping as I said that in just one and a half month if you people have got so many ideas, they have got a gain of 20-45 percent in sugar and I am keeping my positive stance at least till April 17, that is for next 3-3.5 months, difficult to quantify but still across the board one can expect a rise of further 15-20 percent in all the sugar stocks across the board.