Positive on Patni Comp with 6-12 month horizon: SP Tulsian

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SP Tulsian of sptulsian.com believes that Patni Computers , which released its results yesterday, is a good buy at current levels. "The company will be having a topline of close to about USD 1 billion for calendar year 12, so one should not be surprised to see an EPS of close to about Rs 28 to 30," he explains. He also expects the company to release a delisting offer within 6-12 months.

Below is an edited transcript of his interview. Also watch the accompanying video.

Q: What did you make of Coromandel 's move?

A: We have seen a rise in complex fertilizers in the last six months post the free pricing or de-regulation. Since Coromandel is the largest player in the industry, I think the results have been quite good. The company has given bonus in the form of debentures of face value of Rs 15 with a coupon rate of close to about 9%, so that has also an added advantage or an incentive given to the shareholder. This debenture will be deemed as a dividend in the hands of the shareholder which will not attract any income tax.

Going forward, the company intends to set up a plant in Punjab. Setting up a complex fertilizer plant doesn't need much capex, so the capital cost is low. But more of working capital is required, more efficient raw material sourcing like phosphotic and phosphoric fertilizer is needed.

I think Coromandel is a very fit player, very strong player in this space and I am holding my positive view on the stock. I won't be surprised to see a price of Rs 375-400 in the next 8 to 10 months time.

Q: Is that your best fertilizer stock?

A: If you go by the valuation parameter amongst the complex fertilizers, it is undisputedly the best. But amongst the urea player with some component of the complex fertilizer, the second stock falls in that category of GSFC because they have the presence in urea as well as complex fertilizer. Again it is a very strong company with EPS of Rs 80- 85 ruling at a PE multiple of Rs 5. If you really take a valuation call on any stock in the fertilizer space, my two choices will be on Coromandel Fertilizer and GSFC .

Q: What is your view on Patni computers?

A: Whenever a company gets acquired, the first quarter goes into the cleaning up and all sorts of things. i-Gate acquired Patni in May, so the June quarter went in that and now the company has really posted excellent results for the September quarter. I continue to maintain my positive bias. The company will be having a topline of close to about USD 1 billion for calendar year 12, so one should not be surprised to see an EPS of close to about Rs 28 to 30.

But the real kicker in the stock will come in the form of delisting, which I am expecting to happen in the next six months or so. Going ahead, the share can move to about Rs 350-360. If an investor is not in a hurry and can hold it for six months, I expect the share to move to about Rs 430-440. In fact, delisting seems certain whether that happens in six months or 12 months; it is only the time horizon which matters. So if an investor is not in a hurry, I recommend holding the stock for 6-12 months.

Q: What's your long term call on HDFC Bank ?

A: The earning calls for HDFC Bank has been given just now - 20% growth on the top line and 30% growth on the bottom line and this kind of performance has been consistently posted by the bank. That's it is one of the most expensive stocks. It rules at a price to book of Rs 3 plus and at a PE multiple of close to 25-26 times. Even though corrections have taken place in the private sector banks, HDFC Bank has been holding its level.

An investor with a longer horizon should really look to remain invested in the stock with a view of 3-5 years. If by any chance an investor wants to take a shift into other private sector banking stocks, he should the moment stock reaches to Rs500 or may be above Rs 500 after the announcements of the results.

Q: What is your view on Mahindra Satyam at Rs 105?

A: I don't think that the profit is likely from that level for least 6 to 8 months because it all depends on the merger move with the Tech Mahindra. Whenever we see rise in the share price of Mahindra Satyam, it is not sustainable. In fact it goes as high as Rs 85-90 and then again corrects to about Rs 65-70.

If an investor really wants to make profits, he has to look to shift to other stocks in the midcap IT or technology space like Mphasis, Patni Computer or Hexaware. If he is taking a shift, then it is possible to make profits. But otherwise, even to break-even, to have his cost recovered he has to have a time horizon of at least 12 months wait for the merger move to happen and at that point of time he should really look for his cost and not profit.

Q: You have seen a bunch of results coming in so far, is there anything in the midcap space that has caught your eye in the last 2-3 days?

A: I am not disappointed with the results of Chambal Fertilizer also. I saw the correction which happened yesterday and I think it has more to do with technical corrections because of the kind of activity the stock saw in the F&O space.

But I don't think the results have been to the mark for other stocks like  INEOS ABS , etc. There has been a little disappointment, but if you want to take an overall call, it will be Jindal Steel and Power .

If you take a call on other results which have been announced maybe like Inox Leisure, the results have been really very good, so the buying call can be given in INOX Leisure . Maybe the profit booking can come in INEOS ABS too. Since I said the stock has really moved up on the delisting hopes, one has to take a mixed call. I am keeping my positive call on even on Chambal Fertilizer at the current level.