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 Latha Venkatesh, Sonia Shenoy & Anuj Singhal.
Latha: One of the choruses we get from several brokerages after the Modi sweep in Uttar Pradesh is housing especially because he is expected to give affordable housing a big boost. What is your pick of the pack and do you like that space?
A: I have been saying from the demonetisation time that housing is a big space and Modi has been continuously harping on that on December 25, when the interest subvention scheme was announced and in the victory rally all the focus was on affordable housing that means house for all by 2022. He has never referred any timeline except for 2022 which has a clear mandate of this government to see that they assume power again in 2019, which gets reinforced again looking into the UP elections. So affordable housing is a promising space and I have been saying this that if you take a call on tier II and tier III cities, I am not saying that all are falling in the same category of affordable housing but tier II and tier III cities are necessarily falling in the category of Rs 2,000-2,500 square feet kind of flats where you can easily buy a flat of Rs 500-600 square feet for about Rs 15 lakh. So yes, the focus is going to remain, interest subvention is given on Rs 9 lakh and Rs 12 lakh with fixed amount of subsidy having given of 3 percent and 4 percent of the interest. Therefore, this is a promising space. I am keeping highly positive stance on that but the only problem amongst the realty or amongst the developer is that you cannot define that they are pure affordable housing kind of people. Take a case of Sunteck Realty -- those who have been developing in Bandra Kurla Complex (BKC) residential flat worth Rs 20,000 or Rs 30,000 square feet, even they are talking of affordable housing or any other developer for that matter. So I do not think that any developer from cities like Mumbai, if not from National Capital Region (NCR) etc, they will necessarily fall in this category but if you take periphery of Mumbai or maybe the outskirts, I am not including the Brihanmumbai Municipal Corporation (BMC), places like Virar or Vasai kind of things, you see huge opportunity opening up in those areas and also for example Dombivli and Kalyan, huge land parcels are lying there and yes, they can necessarily fall in affordable housing category. However, it all depends on capability and land parcel each developer is holding. So I am not taking positive stance right now on the developer at this stage but keeping highly positive view on the housing finance companies and that is what I have been stressing from the middle of November that keep an eye on the housing finance companies. We have seen Dewan Housing Finance Corporation and Indiabulls Housing Finance touching 52 week high, in fact if you take a call going forward, GIC Housing Finance, Can Fin Homes, LIC Housing Finance, HDFC, take the situation of HDFC; on a consolidated earnings the share is available at a PE multiple of Rs 17 on FY18 earnings. So there is huge potential which we are yet to see in terms of share appreciation of housing finance companies on which I am keeping my positive stance.
A: It has two sides of same coin. Let me take a quick call on NMDC. NMDC is now selling iron ore at an average rate of about USD 40-42 or maybe maximum USD 45, if I take both lump and fine. The average selling price is not more than USD 45 per tonne against the imported price prevailing at about sub USD 90 or close to USD 90 per tonne. If you take a situation call going forward, India has turned a net exporter. Now there is no dumping seen from China. So all the steelmakers are doing quite well, their capacity utilisation has gone up, so that has seen the demand of iron ore increasing. However, NMDC is not seen exporting a single tonne; I am not talking of a marginal quantity but they are totally catering to the domestic market. Last week when the steel secretary has said that they will be looking for the profit and not profiteering by this natural resources company probably that has put a halt on the share price upmove of these stocks like NMDC, MOIL. So I am keeping positive stance on NMDC for a simple reason that their estimated production and even on annual basis is not likely to exceed USD 40 million and JSW Steel kind of companies have an annual requirement of about 24-25 million tonne. So there is scope because steel industry is going to see good times going ahead. China having cut the capacity by about 200 million tonne, now they have a capacity of 850-900 million tonne against earlier used to be at 1,200 million tonne. So I am keeping positive stance on NMDC.
Coming specifically on MOIL - because of huge surplus coming in Australia and fear of dumping on the manganese ore, you have seen the MOIL prices getting corrected because MOIL has also seen price reduction against NMDC not having reduce the price, in fact NMDC have raised iron ore prices from March 1 by about Rs 100 per tonne on both lumps and fines but in manganese ore the prices are falling slightly, so I am keeping a neutral stance on MOIL that maybe manganese ore prices will remain soft by about couple of percentage or maybe about 5-7 percent but keeping a positive stance on NMDC.
A: I am keeping a positive stance on Glenmark because there are two or three stocks which are seen to be having less fear of US FDA. One could be Aurobindo Pharma and Glenmark. So these are the two stocks on which I have been keeping the positive stance.
Coming on Biocon - definitely the news flow is quite positive. The roadblock will not be seen in launch of breast cancer drugs but if you see the price at which it has been ruling at around Rs 1,100, the major upside is seen having factored in. Now the stock can only give the move in a trading range of Rs 100-150 because the stock typically behaves in that fashion; it goes up by Rs 50-60-70 in one go and then swiftly corrects also. So maybe a range of about Rs 1,100-1,200 can be taken but downside is seen limited from here on in case of Biocon.For entire interview, watch accompanying video.