Feb 01, 2012, 07.27 PM IST | Source: CNBC-TV18

Hold or exit? Tulsian analyses Crompton Greaves, Coal India

In an interview to CNBC-TV18, SP Tulsian gave reading and outlook for stocks across various sectors like Crompton Greaves, Coal India, IVRCL and others.

In an interview to CNBC-TV18, SP Tulsian gave reading and outlook for stocks across various sectors like Crompton Greaves , Coal India , IVRCL and others.

Below is the edited transcript of Tulsians interview with Sonia Shenoy and Udayan Mukherjee of CNBC-TV18. Also watch the accompanying video.

Q: Would you buy Crompton at Rs 140 now?

A: Looking to the results, no. But I am unable to connect the run up seen, is this more because of short covering or fresh call been taken in view of positive view on the capital goods sector or management discussions after Q3 numbers. The company has been able to maintain the topline growth; it posted a topline of Rs 3,000 crore plus for the quarter against estimates of Rs 2,700 crore, which it has surpassed by 10-11%.

But margin remains a big concern. The stock has risen by about Rs 14-15 today. Since I have soft view or negative view on the market going ahead, we can see the stock correcting after touching a high of Rs 144-145 and it can again slip back to Rs 130. At that time, one can look to take a call on the stock at those levels.

Q: Coal India continues to weaken what did you make of what the Coal Minister, the former Chairman of Coal India had to tell? Are you reassured that things will be okay post March?

A: Things will be okay post March; the minister gave difference between gross calorific value and useful heat value, which was used earlier. I am quite hopeful that post March we will be seeing accretion in the bottomline of the company. If one sees the pattern, the build up seen in this stock gets erased by some reason or the other.

So, renewed buying interest will again come at around Rs 310 because it typically falls below Rs 310 and again we see short-term trading interest coming back. I will look for Rs 310 level for entry because I am quite confident that by first week of April, we are going to see a price of Rs 345-350. It can happen much sooner possibly by middle of March, so that can be taken as range of entry and exit in the stock.

Q: In the broader markets the IVRCL twins are seeing a move again, both - IVRCL and IVRCL Assets . Do you expect more steam from here on both these stocks?

A: Both the stocks have moved about 80-100% in this last one month. One can understand this because IVRCL Assets is are getting merged with IVRCL Limited on a swap ratio of five shares of IVRCL for every six shares held in IVRCL Assets.

One can coolly take a call on IVRCL. I have been maintaining my view for last one month that, 75% stake held by IVRCL in IVRCL Assets is getting extinguished, so that is keeping the equity of merged entity quite low. They are going for demerger of realty assets and PPP projects. This indicates that company will be aggressive in selling those assets and de-leveraging the balance sheet. That will substantially bring down the debt, which is currently to the extent of about Rs 2,200-2,500 crore.

If one sees the standalone result of IVRCL, I dont see any problem in terms of their order book. They have Rs 14,000-15,000 crore of topline and their PAT margin is at about 6-7%. Inspite of that huge run up of about 80% plus, I am maintaining my positive view on IVRCL Limited. It will be a good strategy, those who are having a one year horizon can look to go to IVRCL assets.

They can look to acquire shares via that route because effectively that gives an arbitrage opportunity of about 8-10% even at the present price. I continue to have my positive view. The stock can move to Rs 62 to Rs 64 in the next one month and there again it should take some pause and should settle for some time.

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