In times of uncertainty and extreme volatility in markets, it is important for investors to be cautious. With domestic and global changes, even good stocks are hanging by the skin of their teeth. Maruti Suzuki, post the demonetisation roll-out announced cut in prices of about Rs 10,000 to Rs 45,000 which did not fair well for the stock.
However, SP Tulsian keeps a positive view on the stock.
In conversation with CNBC-TV18, he said that if stock price falls to around Rs 5,000 then it is a buy and if it comes to a level of about Rs 5,300 then there is no harm in booking profits.
Below is the transcript of SP Tulsian’s interview to Anuj Singhal and Latha Venkatesh on CNBC-TV18.
Latha: You look at the tyre stocks and you have not been impressed with them in the past. Now, we again see all of them jumping up. Is any of them worth a buy?
A: If you see the price behaviour of all these tyre stocks, they are moving in a range. And I do not think as an investor, you will be having that kind of comfort. When the stock moves up, maybe by about 3-5 percent, it comes down again swiftly in the same level. And maybe for a trader, this will be equally more risky because the volatility is difficult being faced by the traders as well. So, maybe if you are looking, if you are a trader, maybe try to look for a range, only in a stock like Ceat because MRF is seen out of reach of the investors, there is no point in taking a call. Apollo Tyre is looking expensive. JK Tyre is looking expensive because JK Tyre, the only reason of apprehension is that the integration pain of the tyre division which they have acquired from Kesoram has yet to be seen in the next couple of quarters as well.
Balkrishna Industries is totally coming in a different ball game or maybe the TVS Srichakra. They are also in a totally different orbit which cannot get compared with the usual tyre stocks. But even in these two other tyre stocks, that is Balkrishna and TVS Srichakra, both are again looking expensive. So, overall, if you take a view on the tyre stocks, I will remain away. Maybe on a relative basis, you find many other ideas in other sectors, other stocks.
Anuj: We discussed it on phone of course yesterday. Crompton Greaves. That has been extremely volatile today. Is the market’s fear well founded or do you think this is a buying opportunity if you include yesterday’s 10 percent decline and today’s another 3 percent fall?
A: If I am a brave investor, not using the word as trader, I will rather go for it because if you see the situation, I have expressed yesterday that the only apprehension that the acquirer is seen a private equity (PE) investor and that is being talked as a negative that PE investors generally are very cautious and they may back out of the deal, but if you really see the transmission and distribution (T&D) business which they are looking to monetise, I do not see any reason why the company would not be able to monetise maybe at Rs 700-750 crore. But that will take a little longer time, the due diligence process has to start, 4-6 months will go in that. And if you see the situation now on the financial front for the company, the debt is less than Rs 1,000 crore on a consolidated basis for the company. And if you see the financial performances, the losses we have been seeing are mainly from the discontinued operations of the company that is T&D and business to business (B2B) automation where both are getting monetised.
So, if you take a valuation call on the stock, I do not think that there is any kind of reason for taking a negative view because even on the standalone basis, the company has been consistently doing well when it was a merged entity prior to Crompton Greaves Consumer Electric having hived off from this company. So, if you are seeing the ultimate objective of the group or the company to monetise the overseas loss-making assets, then that will happen at some point of time. And both these businesses can give you much higher amount maybe Rs 1,200-1,400 crore. And if that is the case, you will see the losses of about Rs 200 crore getting stopped on an annualised basis plus the savings in the interest to the extent of about Rs 80-90 crore. So, this may qualify as a medium-term investment buy, but if you are only riding on this news, then you have to wait till this evening or maybe till tomorrow afternoon where we will be seeing the Q2 numbers also getting approved by the board probably in which they may give the outcome of the fate of this deal of asset monetisation.
Latha: You recommended Rane Brakes sometime back, didn’t you, is it still good to go?
A: This stock was recommended by us may be sub Rs 500 and post that we have seen the price of Rs 1,300-1,400 also where I said that the stock has moved up quite a lot and definitely this needs to see some correction. Again at Rs 900 we have been giving buy calls since yesterday and today it has gone up, I think it has crossed Rs 1,000 maybe Rs 1,050-1,100 because now it has seen a high beta kind of stocks where you see this stock moving up swiftly and then may be if it doesn’t move up beyond a point then profit booking also comes in. So, maybe one can take a range of about Rs 850 to about Rs 1,100 for the stock. However, the bullishness which we had at sub Rs 500 is definitely not there, so look for this range of Rs 850 to Rs 1,100 in the stock.
Anuj: Hindalco of course has been remarkably strong stock all through this year but Nalco over the last one month has made a big run and today is up 10 percent?
A: Alumina has been seeing a better realisation and if you see the product profile of the Nalco they are focusing more on the alumina rather than aluminium so maybe that could be the reason. However, actually the kind of run up which we should have seen in the aluminium along with the other non-ferrous metals what we have seen for the zinc and copper has not been seen in aluminium.
However, maybe alumina could be the reason for the Nalco to move up because they have a larger presence in making alumina. They don’t convert that into aluminium, they sell alumina, so that could be the reason otherwise any specific reason for this 10 percent up move is not known.
Latha: Your other favourites as well as I wanted to ask you because many of them the prices have moved a lot. Many of your stocks have moved up and also receded a bit. Any thoughts on Jayant Agro-organics, any thoughts on Star Paper if you have looked at that stock as well if I remember right Bhageria Industries, you still like that?
A: Three or four stocks first let me take those. You have narrated three or four stocks one is Jayant Agro, second is Rajratan Global and third is Cineline India. Let me tell you that on all three we are still keeping a very positive move. I won’t be surprised to see these stocks giving a return of maybe about 25 percent by March 2017. Now coming on the other stocks specifically on Star Paper if you take the comparable play Star Paper we have given a buy call at Rs 140-135, but stock having run by about 50 percent or maybe 40 percent in this last couple of weeks.
We are keeping a very positive view on the paper industry and three stocks comes to the mind, one is NR Agarwal Industries, second is Seshasayee Paper and third is the Kauntam Papers. These three are again looking good.
Coming specifically, on Bhageria Industries the Vinyl Sulphone prices has been going up or I would say that they are ruling steady. So, maybe but the kind of run-up which we should have seen has not been seen getting reflected, so may be AksharChem and Bhageria again should take a pause for some time. As a matter of disclosure let me give that I am on the board of Bhageria Industries so that may be get noted off as my disclosure.
Anuj: Do you have a call on Sun TV from investment point of view?
A: Actually, yesterday its up move was seen more as sentimental. I don’t think there was any fundamental reason for the stock to move up and I don’t think that if you take a valuation parameter and your valuation call this stock was always looking very cheap when you specially compare it with Zee Entertainment. However, that has not been happening because of the all adverse news in respect to groups and all that so yesterday’s up move was more sentimental and that profit booking is seen coming in so keeping a neutral view.
Anuj: Maruti Suzuki has been quite volatile over the last one week or so, we saw decent sales number but the stock has rallied before that and after that it slipped and today also it has been very volatile. As an investor is it now a good time to buy Maruti? Is risk reward again in your favour?
A: The November sales numbers were excellent and post that the news came in that prices have been cut by the company to the extent of about Rs 10,000 to Rs 45,000 and that has seen the party getting spoiled. However, I am keeping a positive view and I have said in fact on Friday that if you see the valuation parameter for the stock it becomes a very good buy maybe sub Rs 5,000 or maybe closure to Rs 4,900-4,950. You cannot expect the December sales numbers to be as good as it was seen for November in spite of the waiting and all that.
On top of it the people will start fearing for the depressed profitability on quarter three also in spite of the sales numbers quantitative terms being maintained by Maruti. So, maybe if it falls at around Rs 5,000 go and buy it and if it comes to a level of about Rs 5,300 no harm in booking profits.
Anuj: The sector of the day is power and we have seen some of these stocks gain ground off late. Adani Power, JSW Energy, Torrent Power any of these stocks that would be on your buy list?
A: I am in fact keeping myself away from all this power generation company maybe Torrent Power was seen as the value buy amongst when it was ruling at around Rs 175. However, having bagged the contract for Bhiwandi again for next 10 years the stock has seen moving up. The prices in fact if you take a call on any of these stocks whether you talk of Adani Power, Tata Power, CESC, Torrent Power the prices are not seeing sustaining and it has dipped very quickly. I have been keeping the negative view on the NTPC for all along, so I will keep my neutral view on this power generation companies.