In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on stocks and sectors.
Below is the transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Anuj: If our viewers had heard you yesterday, you had recommended to buy sugar stocks. You expected a second half surge today. That is what we are seeing right now. Explain to us what is leading to this surge and whether any stocks can be bought at current prices as well?
A: Yesterday in fact, I have said that on 17th, Indian Sugar Mills Association (ISMA) will be releasing their production report. But that has not been out on ISMA site as yet because I checked it about maybe 3-4 minutes back and yesterday I have specifically said that on every 17th and 2nd ISMA releases the production figure and if you recall ISMA have been continuously reducing the production target of sugar from 234 lakh tonne to 213 lakh and now reduced to 203 lakh tonnes. While I have maintained a production target of not more than 193 lakh tonne for this season.
So, probably this is going to be the scenario going forward. Maybe ISMA report must be getting released in a while or so, but if you really see the situation prevailing on the ground, it is so precarious that the sugar production is seen down in Maharashtra and Karnataka by about 40 percent or maybe to be precise maybe 42 percent while I Tamil Nadu, it is down by about 33 percent. The Uttar Pradesh is the only sugar producing state which will be showing a production growth from 68 lakh tonne which they have produced last year to about 84-85 lakh tonne. That means the eventual production growth will be 20 percent. So if that is the scenario and if you see Rs 37 as the ex-mill price, the choice is obvious and there is no need to apply the mind that go for all the UP based sugar mills.
Now the question comes that which all needs to be looked into. So, amongst the UP also, the companies which are going to exceed the 20 percent estimated increase in the production of UP state, those companies should be looked into. And in that category, what I have on the ground report that Triveni Engineering and Industries will be producing about 24 percent higher sugar production. Last season they had produced 48.5 lakh bags and this season they will be producing about 61-62 lakh bags. Second is in terms of the production and I request every viewer to take a note of this that the incremental production to be shown by each company is very relevant.
Second will be the Dhampur Sugar Mills, third will be Dwarikesh Industries, and fourth will be Dalmia Bharat Sugar and Industries. So, what my advice is that look for only UP based sugar mills and those who will be exceeding the production by more than 18-20 percent over last seasons production. So, these are the four choices which I am advising now, Triveni, Dhampur, Dwarikesh and Dalmia as of now. I am not saying that the other stocks are not good, but Balrampur Chini may be showing a growth of about 13-14 percent production only over last year because the situation has not been seen that good in the eastern UP where Balrampur Chini is having a presence.
So, my advice is that yes, keep a bullish view. Again probably on April 2, when the production report for March will be released you will see the same kind of renewed interest getting revived in the sugar stocks again.
Anuj: Any other theme that you are backing right now? We spoke about sugar. But anything else where investors can look for a fresh trade or a fresh breakout?
A: Let me give you the latest development on the dye intermediate front which has been happening in China because if you see China has implemented the strengthened pollution control norms and minister who is in charge of this is taking a daily view on the pollution controls because the dye intermediates companies seem to be a big headache for the Chinese government. And if you see they have a strong presence and actually of this, whatever the ground report I have that the two plants have already closed and the daily monitoring of the Chinese government on this pollution control has seen the prices of vinyl sulphone rising from Rs 225 to Rs 275 and from H-acid from Rs 325 to Rs 375 in India in this last one week. That means both the prices have risen by about Rs 50. That means a rise of about 20 percent and 23-24 percent.
So the dye intermediate makers, those who are making vinyl sulphone and H-acid in India, they will stand to gain because if you talk to these industry guys, they are expecting that the situation is going to worsen on the Chinese front and because of the curtailment of the production, the dye makers will be requiring this dye intermediates globally because dye if you see overseas or in the global market, March is seeing the robust demand. And because of that the dye intermediates like vinyl sulphone and H-acid both have a very huge demand. So I am quite positive on these stocks, those who are making vinyl sulphone and H-acid and prominent amongst them are AksharChem, Bhageria Industries, Bodal Chemicals and Kiri Industries.
Sonia: Next week will be very exciting for all the people who are bullish on D-mart because you have the listing, it is expected to be a blowout one and you have been very positive on this. For people who perhaps did not get an allotment or did not put in the IPO, would you recommend even post listing to get into D-mart?
A: Difficult to give the opinion or comment at this stage unless and until you see the listing because if you recall, I have given a range that it is going to get listed at least at Rs 450 and it will be buy anywhere between Rs 450 and Rs 500. But looking to the situation prevailing on the day of listing, view needs to be taken because beyond Rs 500, definitely the things will become a bit stretched because at that point of time, at Rs 500, the market cap of Rs 30,000 crore probably will give the advantage or maybe the attraction in the relative comparative peers maybe like Future Retail and all that.So, no point in guessing at this stage. Let us wait for the listing, but as of now, the range for the listing can be taken anywhere between Rs 450 and Rs 500. I will not be finding it as overvalued till Rs 450, but above Rs 500 this will definitely be seen as an expensive stock.