Post earnings, Tulsian analyses LIC Housing, Ashok Leyland

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com says the market is eagerly awaiting some concrete moves from the government at least before the monsoon session of Parliament begins on August 8. From the diesel price hike to FDI in pharma, retail and aviation the government has its hands full and needs to make positive noises on these issues if it wants to avoid scaring foreign investors anymore.

The earnings season is underway in full swing and today saw big companies like LIC Housing Finance and Ashok Leyland report their quarter results. Tulsian looks at the performance of these corporates and tells investors how to trade these stocks going ahead.

CLICK HERE to listen to the market wrap with moneycontrol.com's Chelsea Saldanha.

Below is an edited transcript of his interview to CNBC-TV18.

Q: If you had to corroborate with the noises coming out of Delhi, do you think there is more to go from here on the upside for the market?

A: I am expecting there to be quite major baby steps which is the view I have been holding on. Yesterday also we discussed that there is disappointment because the countdown has begun and the market starts expecting all these things which even the government knows very well that they need to initiate a move now. August 8 will begin the monsoon session of Parliament. August 7 all of our energy will be focused on the vice Presidential election. So, they have a timeline only of about may be 14-15 days in which they definitely will have to make some efforts.

I am not taking in cues from the petrol price hike which again looks very absurd because on one hand the oil marketing companies (OMCs) are saying that under recovery is only Rs 1.40 per litre, but they have increased it Rs 0.70 and that too in the middle of the fortnight. It doesn’t coincide with the first or the sixteenth which was earlier indicated by the OMCs as well as the oil ministry also.

Hope has also arisen more from the UP government where they have said that they are not against FDI, but they must address it, have discussions on it, look at the interest of the farmers which must be taken care of, so the whole preparation is happening in that front where we will be see more in the form of diesel price hike which has been the long pending issue with the government.

Q: How have you read Ashok Leyland’s numbers? How do they look prima facie?

A: Again, there looks to be a big disconnect if you look at the forex losses of Rs 186 crore. The market has always been taking forex losses as a non-cash item. If you consider the results, it is similar to the case of the JSW Energy where also the bottomline was marginally zero and forex losses were to the tune of Rs 250 crore. Here also one has to really see that what kind of forex losses has been effected earlier by the company and what are the estimates, which we all have factored in but this is a general mechanical analysis, which nowadays market has been taking that if there is any forex loss, the results are not seen to be that bad.

But still taking all this into consideration I won’t be keeping a too bullish view on Ashok Leyland because if you see the relative valuations of Tata Motors and Ashok Leyland, though the Motors has presence in commercial vehicles as well as passenger cars and maybe the global operations, but Ashok Leyland is still ruling quite expensive than Tata Motors. There have to struggle for their market share for which they have to compromise on the margins as well. I won’t be too comfortable taking a call on the stock. I won’t be surprised to see the stock correcting to Rs 21-22 maybe in the next 15 days or so.

Q: What is your view with regards to LIC Housing Finance? The stock is up around 2% post its numbers though the numbers were pretty subdued. Did you managed to look at it?

A: Yes, I saw the numbers. If you see the concerns on the interest costs that has been rising. If I take 78% as the interest cost of the interest income for the first quarter, what they have reported that this used to be at less than 72% for the same quarter of the previous year and about 75% at a sequential basis that means there has been contraction of about maybe 230 bps to about 650 bps over the comparable two periods.