SP Tulsian of sptulsian.com, explains why he is bullish on Petronet LNG. He also discusses key pharma sector likes Cadila Healthcare, Divis Laboratories and Aurobindo Pharma.
Below is the transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Anuj: Your thoughts first on Reliance Capital before we discuss other stocks like HDFC Bank.
A: First, if I continue with the news which has been flashed on the channel on CNBC about the commercial finance and the home finance business, management has already indicated that yes, the home finance business is likely to get hived off and it will get listed on a separate scale. But, if you see, I am unable to take a call right now on the valuations because if you take a commercial finance business, earnings before interest and taxes (EBIT) for FY16 was closer to about Rs 310 crore and for home finance it was closer to about Rs 140 crore.
So, I will not be able to take a call on the valuations unless and until you see the broad contours or the broad parameters of what all business will get transferred or maybe hived off. So that definitely is seen positive because if Reliance Capital as a management strategy, if they have to go for the reduction of the debts, the hiving off, this very much fits in that category.
Coming on the 1 percent stake monetisation in Paytm, difficult again to take a valuation call because I will not be taking it as too significant considering the debt position of the company because this 1 percent may give them a monetisation amount of closer to about Rs 300-350 crore. Because the kind of Paytm valuations now being talked on because everything depends on the time line because if you have heard the statement of Mr Vijay Sharma, the ambitious valuations of the company is seen quite high. But if some investor wants to get out and monetise at the current level, I do not think that 1 percent stake can fetch more than Rs 350 crore. So, this is the overall positive uptick seen coming on the stock which probably is reflecting into the share price.
Anuj: Any thoughts on Petronet LNG or Chennai Petro as well?
A: In fact, I am keeping positive view on, first on if you take Chennai Petroleum Corporation and Mangalore Refinery and Petrochemicals (MRPL) being the refineries having positive view on both because results of both the companies for Q3 were seen very good. Now, Petronet LNG has to be read in context to the import or maybe the quantity increase to be seen in the LNG consumption, the way which we have been seeing and with the crude prices having hardened, the increase in the LNG consumption is going to be seen quite good.
Two other gas stocks which could be Mahanagar Gas Limited (MGL) and Indraprastha Gas Limited (IGL), MGL having corrected after the numbers or maybe IGL also, so I will be keeping positive view on MGL. So, overall positive view on Petronet LNG, MGL, Chennai Petro and MRPL.
Sonia: What do you do with Havells India now? There was a downgrade that came in from Goldman Sachs this morning on Havells citing that there are valuation concerns now and also growth in some of the verticals like real estate not looking very good. What is your own view on the stock?
A: I will confine, now on the stock from two points of view, from two angles. Firstly, Q3 numbers, the margin was seen lower, so I was not very comfortable with the margins having posted by the company. I am not taking a bearish view on the real estate per se which may see the fall in their switch gear and that segment consumption.
Number two, the talk which has been going on because they have to make use of the cash lying with them of Rs 1,600 crore and all that and now, they are looking for Lloyd Electric and Engineering, the takeover of the Lloyd Engineering division. And if that happens, probably at what rate it all happens whether it will be earnings per share (EPS) accretive, because obviously when you are buying the company when there are too many buyers for seeing in this consumer durable space, obviously they have to be a bit aggressive in buying that which again may disappoint.
So considering the present share price of about Rs 425-430 at which it has been ruling, vis-à-vis Q3 numbers and expected acquisition of the, or maybe some inorganic growth, I will not crystallise on Lloyd per se. expected inorganic growth probably may keep the share under check for some time.
Anuj: This week was also the return of pharmaceutical stocks. We discussed Cadila Healthcare for example, yesterday. Sun Pharmaceutical Industries has made a big move today. Lupin has started to make a move. Wockhardt moved today. Anything that you would want to buy even right now?
A: Yes yesterday we have discussed that probably this will have a reflection on the other pharmaceutical companies also and those companies, you have named 4-5 of them, all are having the clouds of the US Food and Drug Administration (FDA). So naturally, market is going a bit positive. But I will add two stocks, one out of the US FDA concerns, maybe can have a positive reflection is Divis Laboratories and second is Aurobindo Pharma. Aurobindo Pharma is not see to be having that much issues of the US FDA because this is a pure fundamental story. But these two stocks can be looked into from investment point of view.