SP Tulsian, sptulsian.com in an interview to CNBC-TV18 shared his views on why Infosys is still a long-term buy, capable of giving 15 percent return and why he is positive on Tube Investments and expects 22-24 percent annual returns from it.
He expects Petronet LNG to post good second quarter results.
In the same interview he also shared his views on Force Motors and NMDC.
Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Sonia: At Rs 1,030 how attractive does Infosys look for the long term investor, yes there could be further downside because of the issues, but do you get a sense that the upside over the next couple of years could be far higher?
A: Because there are some issues that is why we are getting the share at Rs 1,030, there would not have been any downgrade in the revenue guidance or if there would not have been some issues in respect to IT sector then you would not have seen the share ruling at Rs 1,030. Definitely, if you want to take a call it in fact reminds me of the month of February and if you recall when we were in Pune investor camp at that time people were so negative on HDFC at Rs 1,050 and nobody was able to take a buy call on that stock and it moved a high of Rs 1,450 in just next 7-8 months, so what my point is that yes Infosys is definitely looking a good stock, because if you have a good Q2 numbers you have the worry and apprehensions on the guidance.
You can’t have all the thing going in the right way, if you would have upward revision in the guidance and such a good Q2 numbers then probably you would have seen the stock moving up by about 8-10 percent today or maybe 5-7 percent today, so yes definitely if you are long term you have rightly use the word that is it a right buy for a long term investor and I would definitely say that yes this is a right time to buy for the long term investor, because the moment you see one quarter you just can’t write them off. Definitely there are global concerns, Europe concerns, order cancellation maybe margin compression, but that has not seen got reflected if you compare both the results of TCS and Infy.
Infosys is way ahead of TCS though I am not disappointed with the TCS also. Maybe, the top line got disappointment, but if you have been able to maintain your margins and if you have been to surpass your expectations on the estimated profit after tax (PAT) also TCS has done that, but if you compare amongst both the things TCS and Infy amongst both of them Infy has definitely performed quite well even market, even market was apprehensive on Q2 numbers, but as Mr Vishal Sikka has said about a month back that Q2 numbers are going to be better than Q1 that has given some kind of relief, so I think that yes at Rs 1,030 this definitely qualifies a stock for a long term buy which is capable to give you 15 percent return, because that kind of return only you can expect from such a quality and long-term stocks in your portfolio.
Anuj: Petronet LNG has been the stock of the day. Huge open interest build up, what is happening here?
A: I think the fortunes of the company have changed. If you see the first quarter numbers, they were really excellent numbers, company having posted EPS of Rs 5 plus. If you see till FY16, company has been struggling with their lower Kochi terminal plant and even at the Dahej plant the things were at a lower utilisation level and that is a reason FY16 had an EPS of closer to Rs 12-13.
However, Q2 numbers are likely to be even better than Q1 numbers because of the good demand of the gas imports and all those things are seen happening there. Market is expecting that probably company may be able to post an EPS of Rs 22-23 implying a growth of about 80 percent on a yearly basis on FY17. So, hopes of robust Q2 numbers to be seen better than Q1 which itself is quite good is probably making the stock move up.
Sonia: Your view on Force Motors. That stock has now doubled since the month of March and you have been bullish on the stock for a while, is it too late to jump on to this bus or do you think that one can still do that?
A: Definitely it is too late. I recall, maybe on August 16, 2013 we recommended this stock at Rs 600 and post that it has already risen by 700 percent. However, if you see the behaviour, this stock was ruling maybe at Rs 3,100-3,200 about a month back and prior to that it was moving in the same range. So, this kind of momentum play, although I am not saying that the fundamentals are not backing it, definitely the fundamentals are backing but if you go by the monthly sales numbers, what in fact is attracting in this is the non-vehicle sales, the auto ancillary or maybe the other kind of services which are provided by the company. That is in fact making the stocks to move up.
Market is expecting that probably the company for FY17 will post an EPS of closer to about Rs 180 but if a stock has risen by about Rs 1,000 in one month, definitely there has to be some momentum and I won’t advice buying at the current level because if you take on a relative basis, the valuations as compared to any other if I compare it with the SML Isuzu which definitely the stock is looking maybe bit expensive as I said that though it has risen by about 700 percent post our recommendation some three years back.
Sonia: Tube Investments has been one of your big calls over the last many years. I don’t recollect what your recent view is, but I know that you have been bullish on Tube Investments for very long, at Rs 620 how does the risk reward look?
A: Continue to have the positive view and I think that these are the stocks which are capable to give you a return of 22-24 percent on an annualised basis maybe for next 2-3 years and I will keep my positive view on the stock intact.
Anuj: Last month of course you have told us that there was an easy move in both MOIL and NMDC of 15 percent that played out will you book profit here in that positional call?
A: It has played out with NMDC because I don’t know what whether this has got unnoticed by the market day before the company has announced that the paid-up equity has reduced from 396 crore to 316 crore after the company has completed the buyback of Rs 7,500 crore and entire shares have been tendered by the Government of India thereby reducing their stake by about 5 percent to 75 percent.
Now there will be no further offer for sale (OFS) or maybe further stake sale or maybe further buyback and if you go by the September 30 the company will be still having the cash of Rs 9,000 crore and that Rs 9,000 crore translate into per value shares of Rs 30 on face value of Rs 1 and that company has always been paying that huge dividend. Last dividend was if I am not mistaken was at about Rs 11.50 on a face value of Rs 1, the higher dividend payout will continue and the best part is that from October 1 company has raised the iron ore prices of lump by 24 percent and of fines by about 20-21 percent.
The performance which we are going to see I am not referring for the Q2 numbers, but Q3 numbers are really going to be extremely good for the company with earnings per share (EPS) of closer to between Rs 2.80-3 per share and I won’t be surprised to see whole of FY17 EPS at Rs 10 plus and I am very bullish on the iron ore company and if you really want to take a bullish view on any of the standalone iron ore producer I think it is NMDC, because in the olden days you used to have Sesa Goa where people used to go very gung ho, but Sesa Goa now having merged with Vedanta and you now have the whole khichdi of the business appearing in Vedanta apart from that they have their own problem, but if you see the production and offtake already shown a growth of about 10 percent on the first half of FY17 over a comparable first half of FY16, so better offtake, better pricing power, reduced equity by 20 percent and the promoter stake that is of Government of India’s stake having come down to 75 percent all these things are positive.
Yes stock has moved from Rs 100 when we have given a buy call about a month back to Rs 116, but still I think there is a lot of scope to go for and this natural resources company and more especially the iron ore makers will really stand to gain immensely going forward.