In an interview with CNBC-TV18, SP Tulsian of sptulsian.com, gave a positive outlook on cement stocks and made a buy call on UltraTech Cement, Ramco Cement, India Cements, ACC, Ambuja Cements and for the mid-sized cement stocks, he bets on Sanghi Industries, Kesoram Industries, Century Textile, NCL Industries.
For the auto stocks he is bullish on two stocks, one is Mahindra and Mahindra (M&M) and the second is Escorts.
Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Anuj: I wanted your thoughts on the housing finance companies today because you have LIC Housing which is down 5 percent, HDFC is down 3.5 percent but Indiabulls Housing Finance is up 5 percent. What are your thoughts on this space?
A: Coming specifically on the housing finance companies, maybe the interpretation or the weakness, what we have been seeing in case of LIC Housing is seen to be misplaced because if I just give you the breakup of all the average ticket size of the loan, we have tabulated that and Deewan Housing Finance has average ticket size of Rs 12 lakh, LIC less than Rs 20 lakh, Can Fin Home less than Rs 18 lakh, Indiabulls Housing Rs 25 lakh, PNB Housing Rs 32 lakh and HDFC Rs 22 lakh.
If you go by this sequence, I feel that Deewan Housing having average ticket size of 12-13 percent is seen to be the best placed amongst this new norms having announced the Prime Minister to capture the credit growth going forward. However, again, if we all start thinking that probably the entire market share will be taken away by the PSU banks and all that, I don't buy this theory.
If you see in the past, when the housing finance loan rates were slightly higher, maybe by about 10 basis points than the comparable PSU banks available at that point of time, the things have not gone to the public sector banks in those cases earlier also. If you see the approach of public sector banks, it has been really very lethargic in the past. They have always looked for wholesale banking or corporate lending and all that where the mortgage type of situations are there, Rs 5,000 crore having lent by the consortium and all that. They have never really thought of going into the retail kind of things, maybe consumer loan, maybe housing loan, maybe vehicle loans.
However, now I think they also have pulled up the socks but it will take time for those PSU banks to really foray in a significant way. The kind of growth which we will be seeing in this market, take the case of 60-75 percent as the lending amount against the value of the property, people can buy a flat of about Rs 20 lakh or maybe Rs 25 lakh and in fact the value of those properties available in that range is seen huge because if you just knock of the two cities, that is Mumbai and Delhi, I think in all other places you can easily buy the flats within that price and that will be seen a very big credit growth booster to be seen for all these housing finance companies.
So, LIC Housing has corrected by about 5 percent but that seems to be misplaced and I am keeping a positive stance on the stocks more specially where the ticket size is low and in that pecking order, I will go with my first preference Deewan Housing, followed by LIC Housing.
Sonia: The other pocket I wanted to chat with you about was the tractor space because I know you track it very well. This time both Mahindra and Mahindra (M&M) and Escorts have reported very good tractor numbers, do you think that trend is on the upside here and which stocks would you back from either two?
A: First let us accept and admit that the kind of fear which has all been created on the situation prevailing that we have seen that rabi sowing will be seen very bad. In the whole of the month of November media talked on that and now we have finally seen that 7 percent growth has been seen. 6.5 percent or so in rabi. Yes, you are right that escorts and M&M, both have performed very well on the tractor front.
However, I will go one step further, maybe if you exclude Bajaj Auto, I am not speculating on Hero MotoCorp and TVS Motors because they have not yet come out with their numbers and as I said earlier also that on TVS Motors I am keeping a positive view, but if you take the situation on M&M, even on the passenger vehicle front, the company has performed quite well on a sequential basis because people have all been very apprehensive, we have seen many economies, many experts saying that December will be seen more fearful because of the cash crunch and all that.
So, overall things are looking quite good for the auto space and on tractor front but let me just remind here that maybe in the month of January we can see good sales but then thereafter the tractor sales takes lull, and then we see the recovery again coming in, in the month of May when things will start happening again for the rabi season on the expectation of good monsoons. So, I won't be playing merely on the tractor sales theory for M&M and Escorts but looking to the kind of value erosion which we have seen and the price at which they have all been ruling, probably I take a buy call on both and maybe on the other automobile stocks also, maybe except Bajaj Auto. As I said, you exclude Bajaj Auto.
However, apart from that, looking to such a good or satisfactory numbers having seen from auto, I am keeping a very positive stance on the auto ancillary space as well because the kind of corrections which we have seen in auto ancillary space also has taken place anywhere to the extent of 30-45 percent. So, those also get qualified as a very good buy in that space.
Sonia: Come in on this after a very bad two months we are seeing some revival in the cement space, any of the heavy weights cements stocks that you like now?
A: I have in fact giving the positive bias on the cements stocks for the last one week because if you see the pessimism which we have seen having built the victim after the automobile was cement and third was NBFC. In fact if you take a call on the cement stocks I am highly positive on all the mid-sized cement stocks, but I have been giving three or four stocks which are looking quite good. One is UltraTech Cement, second is Ramco Cement, third is India Cements and fourth is either you chose ACC or Ambuja Cements because both can get qualified in the same category. I have been keeping my positive stance on the mid-sized cement stocks like Sanghi Industries, Kesoram Industries, Century Textile, NCL Industries they have all been looking quite good.
Anuj: What are your thoughts on this entire space? The market is sensing something clearly, you are seeing this huge rally regardless of which sector these PSUs are in?
A: You have to take an individual call on each PSU because if you take a call on Hindustan Copper maybe the non-ferrous metal story is playing on. However, I would like to touch these two stocks, one is STC and second is MMTC, in fact if you see in case of STC, that company used to be an intending agent. They used to be the canalised agency for imported cars and some many things.
So, what people or the street has been estimating that they are holding huge chunk of properties and if you go through the balance sheet, in FY15, the company has re-valued all their land and building and that value comes to at around Rs 1,000 crore. In fact, post that people are expecting that probably the value has gone much more because the valuation at that time was very conservative which is usually the case. Now the government seems to have made up their mind that since the things are going on a reform process, there is nothing which has remained on a restrictive list or maybe on a canalised list.
Same thing is for MMTC. MMTC used to be or is the canalised agency for importing minerals and metals and again same things are not seen. So, maybe if I take a call on STC, I see huge value lying in that because 90 percent stake is held by the government and if they go for the strategic divestment which has been indicated by the government also, that they won’t hesitate in taking a strategic disinvestment call and if both falls in that category, I think STC has a market cap of closer to about Rs 1,200-1,300 crore and that is giving a good value.
I will be a bit cautious on the MMTC because the market cap is very high, closer to about Rs 6,000 crore and I have not been able to take a call on the real estate really held by the company because they used to have the weak godown for storing this minerals and metals; in fact real estate is the real story for both these canalised agency that is STC and MMTC.