In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on specific stocks and sectors.
Below is the verbatim transcript of SP Tulsian's interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal.
Anuj: I remember, two weeks back you had said that non banking financial companies (NBFCs) are buy again after the weakness and we have seen 10-20 percent rally depending on which stock you are looking at. What would be your pecking order from here for NBFC stocks?
A: I am happy to see that majority of the experts are now not seen negative on the housing finance company and microfinance company and I hope that the positive bias will start building up on the large NBFCs also and I have been taking the positive call on all of them.
Since you have asked me about pecking order, definitely my preference will go with Bajaj Finance, Ujjivan Financial Services and if I want to enlarge my list then Capital First and Mahindra & Mahindra Financial Services. These are the four stocks, but this list is endless, but if you want me to confine maybe a few among the lot because as I said I am keeping overall positive bias on NBFC space which includes housing finance companies as well as microfinance, but these are four stocks - Bajaj Finance, Ujjivan, Capital First and Mahindra & Mahindra Financial.
Sonia: Tata Power came out with a very weak set of numbers. The margins were weak, the revenues were down 6 percent, what is your view on the stock now?
A: Negative view, because if you see the performance has been pathetic and when you see the management just fighting on the negative issues rather the group, I do not think that there is any point. You do not have any hopes on the sector going forward, the debts have all been mounting up, the only silver lining, which I have seen is that they will be monetising the assets of about Rs 3,500 crore in their coal assets, but that is also taking time.
Yes, very pathetic numbers and I do not think that the things are going to get improved on the Tata Power front because of the huge debt piled up in the books of the company, no respite seen on the financial performance. Maybe even at the Mundra Ultra-mega power projects is also struggling. So, overall negative view on the stock.
As such I have not been keeping the positive bias on the power generation for the time being, except on JSW Energy. So yes, looking to the results on Tata Power, definitely, an avoid call.
Anuj: The other pocket which is making a comeback is cement. How would you approach it?
A: Post demonetisation, non-banking finance companies (NBFC), cement and auto ancillaries, these three were the sectors on which I have been banking on. So continue to have a positive bias on cement.
A lot of pessimism has been seen having created on the housing activity going into the dump where I have said that I do not agree, maybe in the rural pockets in the cities below tier-II, you are going to see a big increase happening in that sector, on that front. If you see the cement consumption, it is less than 25 percent for the housing construction. If you take a call on the infrastructure spending or the kind of consumption seen happening on the road sector on the cement front, I am quite positive.
If you see the situations going forward for the next 8-9 months, you do not have any headwinds for the sector. You will be having a smooth run in terms of the better offtake till June, 2017. So, taking overall cue, the operating leverages will be very positive for the larger cement companies, those who are having a capacity of 10 million tonne plus. So, keeping a positive bias on the sector going forward.
Latha: Housing finance companies, which is your best pick?
A: Again keeping a positive bias. If you take a call now, my preference will be first with the LIC Housing and second will be the Dewan Housing Finance. I am not ruling out the other housing finance companies, but if you take a call or maybe PNB Housing which has been seeing very cheap or in comparison to the LIC Housing on the valuation parameter, if you take on the price to earnings or maybe the book value. But the growth is seen quite high for PNB Housing Finance. So, maybe preference will be LIC Housing, Dewan Housing and then PNB Housing Finance from hereon.
Latha: We will start getting the auto sales numbers. What would be your pecking order if you are buying anything?
A: For the time being, I am keeping a cautious view, but if I am a compelling buyer then I will go with two stocks. One is Mahindra and Mahindra and the second is TVS Motor because definitely the things will be little cautious post the sales numbers and it is very difficult to take a call because of the ground reports, which are not giving any clear signals. So, maybe avoid till I see the sales number and if I am a compelling buyer, then I will go with Mahindra and Mahindra and TVS Motor.