Check out: SP Tulsian's views on buzzing stocks/sectors

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In an interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy, investment advisor SP Tulsian of sptulsian.com, spoke about his views on some stocks and sectors that are in news.

Commenting on the reports of Hindustan Motors perhaps looking to sell off their 49% stake in AVTEC for Rs 400 crore, he said, the stock can get re-rated in a big way if the stake sale does go through. "If all those things happen-company just has a debt of close to about Rs 70-80 crore and if you take this Rs 400 crore realisation-probably the rerating of the stock can happen in a very big way," he believed.

Talking about his next pick for investors, Tulsian went back to his favourite sector to bet on-sugar-where he chose to pick Ugar Sugar along with his tried and test Shree Renuka Sugar. "The current year is likely to be very good for the company," he stated.

Tulsian also picked Value Industries  and Windsor Machines as part of his investment idea.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Hindustan Motors has become quite active of late. What is the trigger for this one, you seem to like that stock as well?

A: The information, which is coming from the company quarters or maybe from Kolkata circle, that company is in the process of finalizing for sell of 49% stake which they are holding in AVTEC, a company which is making the engines and it has a very good value. The company is valued at over Rs 1,000 crore and 49% stake, which is held by the company is being said that it is getting sold at Rs 400 crore because 30% of the investment in AVTEC is held by Actis-the private equity and about 21% by the promoters in their personal capacity.

So things are not very clear whether this 70% entire stake, 21% by the CK Birla family and 49% by the Hindustan Motor, is getting sold or only 49% by Hindustan Motors because if 70% gets sold, then probably the realisation to the Hindustan Motors could be to the extent of Rs 500 crore also because obviously you have the controlling premium getting added to that.

That seems to be a big trigger and if you see the volume yesterday having taken place in the stock and stock having shown a big upmove to Rs 29-it indicates that probably things are going to happen because company was not able to sell the Chennai car plant. They had been in talk with Mitsubishi and all that, so probably they must have make up their mind that let us exit from AVTEC which can easily fetch them a good amount. If all those things happen-company just has a debt of close to about Rs 70-80 crore and if you take this Rs 400 crore realisation-probably the rerating of the stock can happen in a very big way.

Q: From a space that you track very closely sugar, you have chosen to pick up Ugar Sugar today-what is the story there?

A: In Ugar, because the crushing has started and it is placed in the category that I am quite bullish. Firstly, the companies which have the ability to tap the export market either by their direct presence in the export overseas territory or by way of the export entitlement against their raw having made earlier. This is one category and second category I am quite bullish on Karnataka-based sugar mills because in Karnataka you have the highest recovery of 11.5% with cane price also quite stable at about Rs 210-220 per tonne for the sugarcane and Ugar is having a good presence in Karnataka. They have good crushing capacity of over 10,000 tcd with co-gen capacity of more than 50 megawatt plus the distillery of 30,000 kiloleter per day. The crushing has already started at the company.

So all this indicates that probably this year they will be having 25% higher production. They exited from their two sugar mills in which they were not doing quite well. They sold those two mills to EID parry, so now their entire focus will be on their largest sugar mill of 10,000 tcd which they have in Ugar. So, probably current year is likely to be very good for the company. If you take the value of the company, the marketcap is close to 200 crore. This looks quite cheap compared to the capacity the company is carrying or commanding.

So since my view is positive on the sugar sector apart from Renuka, I have chosen this also as a positive stock.

Q: You have chosen to pick up a Videocon group company, Value Industries. Can you tell us about that one and what kind of a target price do you have on the stock?

A: This is in fact a very interesting stock because this is the old company, which was called Videocon Appliances and now the name is Value Industries. They are mainly catering to Videocon Industries by making the white goods components for them. In fact if you see the turnover, the results the company has declared for year-ending September '10, they have posted a topline of close to about 1,400 crore, they have a very low equity with EPS of about Rs 3.50, they have posted a PAT of close to about Rs 14 crore while their paid up equity is just Rs 40 crore and infact the present book value of the company, after this September 30, 2010 results, the book value is close to about Rs 115 and the share is ruling at price of Rs 30. That means price to book of maybe 0.25.

The management has hinted that Videocon Industries or maybe the group may see the restructuring of the company, that is, the flagship company Videocon Industries, in maybe four companies-one for power generation, one for oil and gas exploration, one for telecom and one for white goods etc. So this company could be taken as an independent white goods company and if that happens, this can show us substantial increase in the top-line as well as profitability. As of today the company has been given the measured profit margin by the flagship since this is not such a big company for the group, having very low market capitalization of Rs 115-120 crore only, probably this is a big trigger.

As I said price to book itself is a positive indication for the stock with topline intact, EPS also if you take the P/E multiple it is ruling at a P/E multiple of less than maybe 8 or something like that. So, I have quite positive view on it.