Market expert SP Tulsian doesn’t want to take an extremely bullish view of liquor stocks despite the Patna High Court striking down Bihar’s liquor ban. He says Bihar Chief Minister Nitish Kumar’s political survival may depend on the ban and he expects the state to move the Supreme Court.
“I will not be rushing that okay, the liquor stocks or the brewery stocks are seen as a theme now after having shown a good run up,” he said.
Below is the transcript of SP Tulsian’s interview to Anuj Singhal and Latha Venkatesh on CNBC-TV18.
Anuj: So many stocks to talk about. Let us actually first start with the liquor stocks. The Patna High Court overruling the Bihar government, do you think it sets a template and now, are there more gains for some of these liquor stocks, stocks like United Spirits among the largecaps and even some of the smaller ones?
A: I will not be taking an extremely bullish view on these stocks because after having run up, when we have seen the Patna High Court judgement having come in, we have seen the a good run up happening in these stocks. But if you just see a little background of the Bihar government and the nature and behaviour of Nitish Kumar, I do not think he will just leave it like that because it reminds me of Shahbuddin, the bail has been cancelled by the Supreme Court which was granted by the Patna High Court. Definitely Bihar government will definitely move to the Supreme Court and maybe one should not just think that this is a complete order or this has revoked the ban in the Bihar states because that is a very political survival for Nitish Kumar to have this liquor ban continue in Bihar to control the crimes and to woo the woman voters also.
So, taking all this into consideration, I do not think and generally if you really see, the rally has not seen sustainable. Yes, there has been combination that Kerala is also considering to revoke the liquor ban. But I will not be taking because if you see the present situation, the ideas and the opportunities available in the other sectors are seen equally there. So, I will not be rushing that okay, the liquor stocks or the brewery stocks are seen as a theme now after having shown a good run up in the last maybe two or three hours.
Latha: Your other favourite set of companies which have given multi-bagger returns, the chemical companies, is there any value left in any of them now?
A: In fact, values are left in all. Yesterday or day before also I have said that till you see the Q2 numbers, believe me, once you see the Q2 numbers, I will not be surprised to see them again going up by 10 percent from there. There are four companies which I have been recommending and in fact, yesterday if you see the AksharChem (India) which was yesterday in that whole carnage, it was hitting the upper circuit and it closed at upper circuit. But unfortunately what is happening. I am just giving this an example, because even if you take today, the stock of AksharChem, it is in the monthly ban which people, they do not understand. Even brokers, they do not understand. I get so many queries, because having recommend this stock at Rs 300 ad now, frozen upper circuit at Rs 466, it is in a monthly ban. People, they do not understand that what this monthly ban means which is applied by the BSE alone and not by NSE and AksharChem is listed on BSE.
Now this monthly ban will get released from one day and I will not be surprised this Rs 466 at which AksharChem is ruling, moving to Rs 520-525. That means next 2-3 days again, 5 percent upper circuit. Since you have asked me that what is upside left, 15-20 percent upside can be seen in AksharChem and once that happens on a relative basis, people will run to buy the comparable peers like Bodal Chemicals, Bhageria Industries, Kiri Industries because there are only four significant players, those who are making vinyl sulphone. As I have been repeatedly saying for the last one month that this will be seen the record performance to be posted by all the companies in the history, in the lifetime of the company, the best quarterly results. So, I am still taking a positive view on all these four stocks with and upside scene of about 15-20 percent. By that time, we will see a Q2 number from them which will happen by end of October or maybe first week of November.
Anuj: Since you identified this story long back, a lot of our viewers would want to know what would be the eventual price targets on some of these. What would be a good time to book profits because they have had just a one way journey? And of course your disclaimer has been you are on board of Bhageria.
A: You are right. Actually on March 30, I gave this story and since then we have already seen the stock trebling or quadrupling. That means the stock has given you return of 250-300 percent or maybe 225-300 percent. Now, if you go on the specific product, because you need to take a call on dye intermediates and not on dyes and pigments because dye intermediates is raw material for dyes and pigments. If you see the product of vinyl sulphone, the prices having almost doubled. As I said, earlier also, Kiri and Bodal, both the promoters were on our channel a week back or maybe 10 days back when they have confirmed this price rise of having doubled. So, 80 percent of that doubling the price rise gets added to the bottomline because all the backward integration or the raw material required are all in house. And if you see the situation prevailing now in China, China which used to export or which is used to export vinyl sulphone now have started importing because of the pollution threat and all that, but you just cannot take a linear call on these stocks. You have to take a quarter-on-quarter (Q-o-Q) view.
As of now, for second quarter, which will be ending today, all these four companies have performed excellent and in fact, as of now, for one month visibility to talk to the industry people, they do not see any kind of apprehension that the prices will recede. The prices will keep reducing by Rs 50 here and there by per kg but that will not make a difference. So, what my point is, as I have said while back, that take 15-20 percent. When I started referring AksharChem on a comparative relative valuation basis, I said that Bhageria and Bodal can rise by about 15-20 percent, but it has gone up today only by 9-10 percent. And as I said that AksharChem looks certain, I cannot give you the guarantee that it will hit three day upper circuit, but that itself will be very positive. So, I will keep my view alive only till the Q2 results are out, but by that time, we will see the trend for one month in Q3 also that what kind of realisation these companies are making. So, take a 25 percent upside as of now till the results are out for all these companies.
Latha: I wanted to ask you about L&T Finance Holdings. Yes, it rose steadily, but then kind of fell off from that Rs 100 or short of that Rs 100 mark. You would like to buy it?
A: Actually, we have recommended the stock at Rs 70 and since then it has moved to those levels. And I do not think that one stock can keep running like that because you do not have the explosive growth seen from the company’s performance. So, I will not be keeping, in fact, I have other better ideas in the non-banking finance company (NBFC) space. So, maybe L&T Finance can be given a pass.
Anuj: In the midcap basket, there is a wide variety of stocks and we have seen a lot of come back in a lot of stocks today. But what stocks will you buy which have still not gone back to the previous highs which have still seen a bit of a correction over the last 3-4 days.
A: Removing your rider that which have not gone in this last couple of weeks, I will remove this rider and say that two stocks because we have been talking for quite a lot on the tire stocks. Two stocks which I have aired my view on the channel also. One is Kesoram Industries and second is TVS Srichakra. If I am not mistaken, Kesoram has risen by about 35 percent in the last couple of weeks and TVS Srichakra has risen by 55 percent or maybe 60 percent in the last couple of weeks and if you really ask me, we will continue to have the positive bias on both because if you really want to ask me, probably they will still be the outperformer in the tyre sector because maybe MRF or Ceat tyre, because of their volatility and all that, JK Tyre has already performed, but it has not performed in this last couple of weeks. As I have said for both these stocks. So, maybe TVS Srichakra crossed Rs 4,000. We will not be surprised to see a price of Rs 5,000 also in the next one month.
Similar is the case with Kesoram Industries, we will not be surprised to see it moving to Rs 200 also. So, this is the first of the tyre space and second is of the NBFC space. And two stocks which we hold are likely to again outperform in the sectors. Again, there are maybe 40-50 stocks available in the NBFC. I am not including the private sector banks in that category. So, two stocks comes to my mind. One is Bajaj Finance and second is Ujjivan Financial purely again on the results expectations, the Bajaj Finance is likely to post a growth of maybe about 35 percent in the bottomline over FY16 to FY17 with maybe earnings per share (EPS) of Rs 35 on the 10:1:10 having become, ex-bonus and ex-split. So, that is one stock which I am expecting it to perform.
Second is Ujjivan. Again, Q2 numbers we are expecting EPS to be closer to about Rs 7. If you take Rs 33-35 EPS for FY17, still the share is ruling quite cheap at Rs 450. So, these two stocks from NBFC comes to our mind. On a relative outperformance basis, for the next one month and two tyre stocks, Kesoram Industries and TVS Srichakra having run so much in these last 15 days, still we are keeping positive bias.