SP Tulsian of sptulsian.com, who has consistently maintained a negative stance on PSU banks due to their past performance, has now after their earnings reports, become more bullish on these stocks.
Below is the transcript of SP Tulsian’s interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Sonia: I wanted your thoughts first on Motherson Sumi. We just spoke to the management a while back and they are quite confident of holding on to these stable margins over the next couple of quarters. At this price, the stock is coming in for a little bit of profit taking, but at this price, how are you positioned post earnings?
A: If you recall, last week I have said that maybe in the near-term if you take a call on the stock price around Rs 340-345, when it was ruling a those levels, I do not see much upside in the near-term. But considering the Q3 numbers if you see the two things which we have seen in the performance of the company, one on the standalone number and second on Samvardhana Motherson Peguform (SMP), one can always argue that you have seen the constant kind of growth, no disappointment, just flattish kind of things. But, Samvardhana Motherson Reflectec (SMR) has shown a very good performance and actually again, that could be a very big trigger.
So, going forward maybe post these numbers after having seen such a big run up, you are bound to see some kind of profit booking. But I do not think that the Q3 numbers are in any way disappointed, number one. Number two, management commentary has again been very robust and my of the positive bias seen continuing on the stock over a medium-term and long-term view remains intact. So maybe those who have missed buying it earlier may look for a level of about Rs 335-340 as a good entry point.
Anuj: The other stock to discuss is Bank of Baroda, not your favourite as far as the PSU space is concerned, but what did you make of the numbers and the management commentary?
A: Two things. Firstly you are right that I have not seen the past performance to be quite good of Bank of Baroda. But actually if I just focus for the time being, remove the results and if you see the 11 percent fall. And now if you correlate with the results, I do not think that there is such a kind of corrections is warranted, number one. Number two, yes there are definitely increase in the slippages, concerns on that, but if I go for the brighter side of things, which I look for in Bank of Baroda, there are two negatives which I said, one of the higher slippages and the higher provisions. Secondly is of the no growth seen in the deposit or maybe the deposits and advances base.
But if you see their core numbers, let me touch on the positive side of this, if you see the core numbers, the retail banking earnings before interest and taxes (EBIT) has increased to Rs 842 crore against Rs 577 crore, I am talking on a sequential basis. And mind it, in the PSU banks and more specially the larger ones, if you have these kind of growth coming in retail banking operations, that is seen quite positive, number one. Number two on the asset quality. If you take the netnon-performing assets (NPA) at about Rs 90,000 crore against Rs 90,340 crore on a sequential basis, one can always take the fine analysis of the things going forward on the watch-list and all that. But if you see the absolute number of net NPA remaining at the same level with the relative valuations also having fallen by about three basis point.
And number three, Bank of Baroda is seen, as compared to other PSU banks, they have already made higher provisioning. So I do not think the numbers which the bank has posted are seen so disappointing that it justifies or it warrants a fall of about 10-11 percent. Actually if you see today, all the PSU banks are down whether you talk of Punjab National Bank (PNB), Bank of India. Bank of India has posted very good numbers. State Bank of India (SBI), honestly, I do not see much disappointment on that so no reason because SBI on Friday also fell by about maybe a couple of percentage in the last half an hour only.
So I am keeping a positive stance on SBI, PNB, Bank of India, Bank of Baroda, but specifically, if you talk maybe these kind of results could have warranted a correction of about 3-5 percent because of the technical reason. But I do not think this warrants a correction of 11 percent. So, definitely Bank of Baroda in particular makes a good entry point now for the investor with a view of about 30-45 days.
Anuj: You had recommended some of these chemical stocks, some of the dye intermediary stocks. What is the call on Bodal Chemicals at current levels?
A: Actually, if you see the numbers which has flashed on the screen, they are all year-on-year (Y-o-Y) and there is no point in seeing the Y-o-Y number of these companies, because if you see the kind of surge which we have seen in the vinyl sulphone prices and maybe the H-acid kind of things, that have all seen in these last three quarters. And actually if you take a call on the Bodal numbers and if you go by their Q2 profits, that was at about Rs 34 crore. So, I will call it that the results are more or less son the expected lines and I may not give a buy call looking to these numbers.
Sonia: What do you make of Suzlon’s numbers and do you think there is a potential to buy the stock now? Do you see a lot more value here on?
A: Looking to the numbers, I will not be taking a positive call for the simple reason for the first thing if you see, their core business, EBIT has increased to about Rs 495 crore against Rs 450 crore on a sequential basis. But that has taken a lot of working capital requirement. Probably because of that, the interest burden has increased from about Rs 300 crore to Rs 340 crore on a sequential basis that was not liked by the market, number one. Number two, if you see their operations and maintenance (O&M) business that has given them a good surge in the EBIT to Rs 96 crore from Rs 41 crore.
So, their core business of wind turbine is not moving up while the other section of the O&M which they have supplied in the olden days and they keep the O&M facilities and all that, that has shown a good growth in the EBIT which market is not liking. Market would like to see more growth coming into their core business of wind turbine where I have said that it has increased but a lot of that portion has been eaten away by the increased interest margin. So, I will not be taking a positive call at least looking to these numbers.
Sonia: I wanted your thoughts on Britannia because it is quite commendable that the company has managed to keep a very tight handle on costs despite input cost prices going up as well as demonetisation. And also, they have in the recent past been facing a lot of competition from ITC, especially in the premium segment. Given all of that, do you think that these are a good set of numbers and what would your expectation be on the stock here on?
A: 2-3 points to support in favour of the numbers. I would call them as excellent number, number one. Number two, if you see this one item, I am not too much worried on the wheat but if you see the sugar prices having risen and that has a significant cost to their product numbers, number two. Number three, if you see the company having said that they have provided the financial support to their channel partner, that means to have their topline intact. That has been a very smart strategy because if you see the company saying that in November, there has been a 10 percent drop in sales because of demonetisation and December also has not been on the expected lines.
What the company was expecting and if in the given situation, you are able to show a growth of about 6 percent in value terms, I am not going by the quantity terms, I think that these numbers are really excellent because the kind of fear which was all seen on this fast-moving consumer goods (FMCG) stocks or maybe the other things has not seen having reflected into this, so I am not worried with a slight fall in the margin by maybe about 30-40 or maybe 60 basis points to 13.3 percent. Under the given situation, I think the numbers are excellent and as I have said that providing financial support to the channel partner and increasing the sugar prices. If you consider these two things, these numbers are really quite good.