SP Tulsian of sptulsian.com in an interview on CNBC-TV18 spoke about specific stocks – Reliance, 3i Infotech and Maruti.
Below is a verbatim transcript of his interview with CNBC-TV18’s Sonia Shenoy and Anuj Singhal. For complete details watch the accompanying video.
Q: What is your view on the Reliance numbers? Quite a bit of punishment to the stock, it is down about 2.5%.
A: I am disappointed, largely because of the lower GRM at USD 9.2 per barrel. If you see the gap or the premium which the company has been enjoying over Singapore benchmark has been shrinking. Even the light heavy crude differential has been shrinking. If we see now, this differential is placed close to about USD 2 per barrel only.
If the situation continues like that going forward, probably because of the expected drop in the gas production in FY12 and with this kind of margin and even in the petchem, though we have been seeing the volume getting ramped up by the company in Q4 by a respectable figure, but the absolute EBITDA margin has been on a slightly declining trend. In fact, this corrected by about 80 basis points because of the supply coming in from the Middle East.
Though they were able to increase their topline in the petchem segments, the margin, however, is becoming stagnant at about 15% on the EBITDA levels. From hereon, things will be a bit difficult for RIL and I don’t expect that they will be able to see their Earnings per Share (EPS) going beyond Rs 70, though my call for EPS is around Rs 67-68 for FY12.
One needs to wait for the clarity to come from the management, which we may see in the company’s AGM. Taking an overall view, I have a cautious view on the stock for the next one-and-half to a couple of months.
Q: If an investor has 150 shares of Reliance at the rate of Rs 1,050 each and can hold it for six months, should he stick with the share? Or should he purchase some more shares at the purchase level?
A: Since the company announced their third quarter results, I have been taking a call that share will move in a range of Rs 975-1050. I will continue to have the same view till the AGM of the company which may happen by the middle of June.
My advice to the investor would be that he should wait for the share; he can look to exit at Rs 1,040-1,050 level. He should not look care for the loss of Rs 10. Since he wants to buy more, he should look to buy at a level of Rs 980-985. Since he has a time horizon of six months, I don’t think there should be any hurry or there should be any worry of remaining invested in the stock.
Q: On 3i Infotech - Have you had any chance to track this stock?
A: In fact both, Firstsource as well as 3i Infotech have been in the news that ICICI are looking to exit and this news has been irritating the market for over 12 months. In this period of 12 months both the stock prices have corrected by 40%. In the past ICICI have stated that they are looking to exit from these companies but at a proper valuation.
The same thing happened in the case of Firstsource as well where the 54% or 55% stake held by five Foreign Institutional Investors (FIIs) have shown the interest and the market has gone very positive in case of an open offer, though the off loading of 20% can result in a 100% acceptance of the open offer because 75-80% will not come into the market.
Taking all this into consideration, I have been quite positive on the valuation. If the disinvestment or if the stake sale happens by ICICI Bank they should show a rise of 30-40% from here on.
Q: If an investor has 70 shares of Maruti at the rate of Rs 1,370 and is ready to wait for two year, what should he do?
A: Maruti Suzuki has seen a good progress in two years. If you see the company’s plan till FY13, they will produce 18-19 lakh of vehicles. They have already started working on the project of the seventh automobile plant in Rohtak. So you can definitely stay in the stock from a two years point of view.
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