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Dec 29, 2011, 07.21 PM IST
SP Tulsian of sptulsian.com in an interview with CNBC-TV18 gave reading and outlook for stocks like Jaypee Infra, United Spirits, Reliance Industries, Jindal Steel & Power, Firstsource and others.
SP Tulsian of sptulsian.com in an interview with CNBC-TV18 gave reading and outlook for stocks like Jaypee Infra , United Spirits , Reliance Industries , Jindal Steel & Power , Firstsource and others.
Below is the edited transcript of Tulsianís interview with CNBC-TV18. Also watch the accompanying video.
Q: The big surprise mover today has been JP Infra, up above 15% odd, volumes something have never been seen for a very long time on that counter. How would you rate todayís up move and any particular news that doing the rounds?
A: The news is that probably they will be starting maybe the trial of the express way. In fact it is scheduled to commission by or make open for the commercial use by February end or maybe the March, so thatís positive news. However, if you see the corrections taking place in the stock, it moved to Rs 60 plus maybe a month back or maybe 1.5 month back when the F1 race happened and then it had seen a big correction falling to as low as Rs 30-32. Hence, maybe the renewed buying interest is also coming back.
Their real estate development project is progressing well and in fact in Noida or Greater Noida or Gautam Budh Nagar where they have the land parcels of 1200 acre plus, 500 hectare in each place, three tranches, the valuations are quite reasonable.
The company has been consistently booking profits, so close to about Rs 1500-2000 crore is coming every year from the real estate development. And this expressway completion of 165 kilometer is seen as quite positive. It will start generating revenue for the company, so the renewed buying interest coming back into the stock at the lower level.
Q: How much lower do you think United Spirits could go?
A: Yesterday, I gave a target that Rs 510 looks that levels at which it will bottom out. It has corrected much below that. Generally, when there is negative perception, the stock falls below the expected fair value, where it is likely to settle. I wonít be surprised even if it falls to Rs 480-490.
Finally, it should bounce back and move with a support of Rs 505 to Rs 510. I donít think that much downside is seen here because only concern for the stock was FCCB issue of Rs 800-900 crore. That was not liked by the market. Except for that, I donít think further negative is seen in the share price and it seems to be bottomed out.
Q: Reliance has got quite close to that Rs 709 mark, the 52-week low that is. What are you expecting to hear this earnings season and what would your general view be on Reliance, lot more downside from here you think?
A: The market is not very comfortable with the expected earnings of Q3 from the Reliance Industries. That is because of many reasons, one is decline in the gross refining margin, which is said to be ruling USD 3 lower than the Singapore benchmark. So, on a sequential basis we are going to see a drop of 25-30%.
Second issue is the fall in gas production. There was a brief shutdown of refinery for about couple of weeks in this period. So, if we take the overall scenario, the petchem will be able to maintain their absolute earnings before interest and tax (EBIT) figure. But this refining margin and upswing will be seen as a negative, so market is factoring in that there could be a sequential drop of as high as 6-8% in the PAT.
In fact one circle has been talking of a 14-15% drop but I wonít subscribe to that theory. It is premature to take a call now and we can do that more accurately in the first week January. But this seems to be a forgoing conclusion that Q3 is going to be a disappointment for the company.
Taking all this into consideration, I have been holding a view that it should trade in a range of Rs 700-800. Once it breaks Rs 700 then technical analyst can take a call on the price behaviour. On a earning basis or fundamental basis, they should have a broad range of about Rs 750-760 not beyond that.
Q: Jindal Steel & Power has bounced back after yesterdayís sharp move, from now how would you approach Jinal Steel & Power?
A: Whenever we see fall in Jindal Steel & Power and especially, JSW and it corrects by 8-10%, on a technical account it again recovers back by about 3-5%. But if one takes the secular trend of this stock, I donít think that there is any respite going ahead. They are going to continue with the same problem.
Even in Q3 results, flat performance is likely for the company with EPS of about Rs 40. The kind of erosion which we have been seeing continuously, is denting it further in terms of capital mobilization plan for their subsidiary Jindal Power. The IPO has been getting postponed for the last 18 months.
Taking all this into consideration, I donít think there is any respite on the share price from a pure fundamental point of view taking even the next one month view. But this is just a technical recovery and on the last day we see lot of things happening, we do not know whether long side getting liquidated or short side getting covered. So, technical factor may be responsible for rebound in share price today.
Q: How would you approach something like Firstsource, itís now become a sub-6 rupee stock as well?
A: For the last couple of years we have hearing that ICICI Bank is looking to exit from the company, but nothing has happened. The stock has corrected from Rs 25 to Rs 5, so sometimes I wonder whether there is any meaning. This is because if one goes by the business model, I donít see any problem, itís one of the largest BPO catering to the telecommunication and all sort of things. But I am unable to understand the kind of negative, which has been building.
Obviously, there always have been concerns about high debt in their books and lack of growth. They have not been not been post growth for the last four or six quarters and especially when CEO, Ananda Mukerji exited from the company, since then the share has been dwindling. If one can take a view of couple of years this could be a good buy. I donít think that business model has taken any beating. The way it has corrected from Rs 25 to Rs 5 or Rs 6, it may move back to Rs 12 in the next couple of years.
Q: Many of the financial names sold off DCB was down, IFCI was down, banking names like Dhanlaxmi Bank , Dena Bank all of them were weak, your top pick in any of the financial and midcap space that you would consider?
A: My weakest view amongst all the sector is on the banking because of the kind of fear seen here. If one sees the pestering happening to midcap PSU banking stocks like Syndicate Bank , UCO Bank , Central Bank , Allahabad Bank , Andhra , Dena , all these are showing weak trend. Even Union Bank can get placed in the same category. I wonít be adventurous to plunge into these banking stocks, but DCB and Dhanlaxmi are having some news expectations. Dhanlaxmi Bank is likely revive its QIP plans, so with the kind of corrections seen, Rs 40 could be the level where one could keep a view.
Same is the thing with DCB because this comes on a radar as a takeover target. About six-eight months back, there was news that HDFC Bank is looking to acquire this bank. One can acquire these banks, but one needs to have a time horizon of six-12 months. So both these smaller banks can be acquired at the target of Rs 40 and Rs 30.
Action in Jaypee Infratech
Jun 20 2013, 11:06
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