Get PN Vijay's view on BHEL, Crompton Greaves, ICICI, Titan

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In an interview to CNBC-TV18, portfolio manager PN Vijay gives his views on specific stocks. For investors he gives his expertise on companies like BHEL , Titan ,  Crompton Greaves and ICICI Bank . He also analyses the sugar sector and the PSU banking space.

Below is an edited transcript. Watch the accompanying video for more.

Q: BHEL was 11% down yesterday. Did you think that fall was deserved and how would you approach it now?

A: The fall was justified because along with the other stocks in the liquidity driven rally BHEL had gained a lot, but one was always apprehensive with what the figure on the ground would be. The savage cut in the order book had to be expected given the total paralysis in the coal linkages that the power sector is seeing. So when the market saw that the results were poor. Apart from the order inflow there was a de-growth which was something terrible for BHEL.

I don't think it has done that for the last several quarters, people sold in mass numbers because they had built-up positions and were getting out to the exit door as fast as they could. So BHEL is a bit of bad news right now and it's going to be the last to catch up. The likes of Larsen and Toubro would probably recover faster because BHEL is in a very capital intensive business and requires a lot of things to happen before the orders start coming again. On the whole, BHEL deserved the treatment it got on the bourses.

Q: There is Crompton Greaves that's up today. What do you expect to hear from that company?

A: Nothing sensational. Crompton has changed its business model substantially. It's more and more out of consumers and focusing on the T&D aspects of power sector. But here again the order flows have been muted. The input costs have been rising last quarter and also the rupee has been hitting most people very, very badly. Let's not forget the last quarter was the worst. We saw more than 10% fall in the rupee.

All of that is going to affect Crompton Greaves. It's got a good brand, no doubt but it's in low margin business, high cost businesses and unless these businesses see huge topline growth their profits are not sustainable. Their bottomline depends too much on the topline. I am not expecting anything sensational from Crompton either today.

Q: ICICI Bank's numbers are also out today. So far the private banks have done well this quarter. Are you expecting any surprises from ICICI?

A: I am expecting a positive surprise from ICICI Bank. It was several years ago when it topped off in the same breadth as HDFC Bank, then things went horribly wrong in its assets. But people are not realizing how much work those guys have done to clean-up their agents' tables in the last two years. True, the NIM is still a concern. NIMs are far below that of HDFC Bank or Axis Bank but incrementally there is improvement.

There are some little black spots out there in the overseas market where they tried to be a bit adventurous and got exposures to Euro debt, but that's again manageable and that's also been provided for. On the whole, ICICI Bank didn't deserve to go to Rs 700. It had a good rise though it fell yesterday. I am expecting in fact that the Bank Nifty which has been sort of going down would get a big boost from ICICI Bank. I am expecting quite a lot from ICICI Bank today actually.

Q: The space that's been holding out on policy expectations is sugar. There is talk of reviving all the decontrol mechanisms that were suggested for the sugar space. How would you approach that sector now given the setback they got in terms of paybacks for the previous couple of years?

A: The Rangarajan Committee has been appointed and he is a very influential man. If they come up with something quite sensational it's possible that after the UP elections it is sugar after caste and religion which is the biggest determinant of vote gathering. We might see some policy issues. Compared to fertilizer and oil, sugar is easiest to crack, so we might see some activity.

One thing we are expecting is that the levy quota will get totally abolished and to some extent this dichotomy of a state advised price being put on the central government advised price which gives a huge differential between sugarcane prices in UP for example and in the South due to the maverick behavior of local politicians has to be sorted out. On this too one is expecting good news for the sugar industry.

The industry has severally underperformed but it's not a bad industry. It's an industry where India is globally competitive driven by local consumption. It is policy paralysis and policy interference that have kept this industry down. I am hoping that the Rangarajan Committee will come up with some solutions which you and I would expect them to do and then we will see some great pickup in sugar stocks. As of now, from an underperformer on sugar we have given it a market rating and concentrating on South based sugar companies where political interference is a lot less.

Q: This time the PSU banks' numbers don't seem to be as bad as the previous quarter. The slippages are not that nasty. What would you buy now from the PSU banking lot?

A: In the PSU banks, if one were to do bottom fishing, Bank of Baroda would be a perfect case. It sort of sold off after touching Rs 820 on the perception that there was a sharp increase in the non-performing loans, but if you went a bit deeper there were basically two cases, Kingfisher and Global Tele which have provided probably a bit more than what they needed too. So it's a very strong cash flow they have in terms of net interest. The balance sheet is also very, very strong.

So if one had to come in at lower levels and use the sell-on results type of selling, Bank of Baroda would be the best bet. Apart from that, Allahabad Bank also looks very good. The results are strong. Being a Kolkata based bank, people have been a bit apprehensive about the quality of the management, the quality of the assets etc and we tend to club it along with UBI and UCO Bank which are its sister banks down the road in Calcutta.

But it is very differently managed. If you have the guts really to wander into the midcap PSU banking space and you need to be thick skinned to do that, Allahabad Bank would be a great bet especially after yesterday's results.

Q: Any thoughts on Titan? What do you expect to see this quarter?

A: I expect Titan to maybe come out with rather lacklustre results. This quarter the topline has been sluggish. The second is that the EBITDA margins are under pressure and the EBITDA has never been great for Titan. They have been a volume topline player.

The third is gold speculation, gold inventory, the huge profits whivh may have come off as gold came off last quarter. The gold element in Titan may not be that much. All in all a rather expensive stock trading at a very high price earnings even for an FMCG. There is a possibility that people would sell if the results don't even match up to their estimations.