SP Tulsian's bets on infrastructure and agri-based stocks

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SP Tulsian of sptulsian.com spoke to CNBC-TV18 about stocks that are on the move today.

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

Q: At what point will you think Jain Irrigation is attractive enough for a relook?

A: In my view, it has bottomed out. But the technical factors are difficult to see as to how much it will get reflected into the price because generally for investors the problem is whenever the stock bounces back, they start scratching those particular stocks and start relooking at the prices. But when they see the 52-week low, sometimes they do not have the courage because again they try to relook those lower levels.

I have my doubts whether Jain Irrigation can really revisit those lower levels unless and until something goes extremely bad because even if you see the forex losses, the AS 11 is going to give a good relief to the company which is one of the factor for the share to fall further. So fundamentally, a call can always be taken on the stock, maybe at current levels, and if you want to be little cautious, those who have a longer horizon can look to acquire the stock at close to around Rs 80 levels.

Q: Wanted your thoughts on Hanung Toys and the big spike up that stock saw.

A: I will attribute all these things to informed buying. Last month, we have seen margin call pressure eroding value of so many stocks. Probably, Hanung Toys also falls in that category. But yes, if I take a fundamental call on the stock, with expected EPS of close to Rs 40-42, even in the given circumstances for FY12 and factoring in their H1 results, the share was available at a PE multiple of 2 times.

However, I won't solely call it as a technical factor or attribute it to any news of warrant cancellation or may be the hold on the equity dilution plans. These kinds of moves, we may call it as informed buying or being made by market-making elements close to the management circle.

The stock has a potential to move to about Rs 120. And again, we will see sharp profit-booking coming in. Sometimes, you would feel that insiders are playing in a big range because ultimately, they are aware about the direction of the stock price movement since when they will get out, again the share will fall to Rs 80. These are really very risky stocks for the short term traders, but yes, if you want to take a call, they have the textile division, they have the toys division, both are contributing 50-50% to the top line and bottom line, and as I said, if you rely on the earning estimates of Rs 40-42, probably one can. I won't advise to buy the shares at these levels, even from a short-term trading point of view.

Q: I wanted to get you in on Mundra Port and SEZ that has been a relative outperformer in a falling market. Today it up about 1%; any thoughts?

A: I think it has come down to around Rs 125 levels and that makes sense for the investor. I don't think that one can really take a call from a trader's point of view. Unless and until he has a positional view of at least one week or so, it is better if somebody keeps a view for the whole series. You can go long at Rs 125 for the January series, with a deep stop loss. But I do not think there is much downside left because I do not think that the concerns on the infra stocks have remained so much and this is a profit-making company with its business model in place.

If you take the call on other infra stocks also, like GVK or GMR Infra , they really moved on asset base, those who have large airports, or seaports in case of Mundra Ports. So it makes sense for the fundamental investors to buy or enter into the stock at these levels.

Q: From edible oil refiners to sugar refiners to perhaps seed and water-related companies, even fertilizers.... Anything in that agri-pack that you think is holding value in terms of debt and EPS positions?

A: There are lot many stocks. We spoke about Jain Irrigation, second could be GSFC , third could be PI Industries in the agro-chemical space. We have been very negative on sugar and I have been holding that view, but I think that there maybe an exception. If you can really keep a view of about 18 months because this season has already started, next season is going to be the season of shortage, and so to make big money in the sugar stocks, you need to start warehousing them at least 12-18 months in advance.

I think with that view, Renuka falls in that category. I don't think that Renuka can really fall further from here on. Rs 25 looks to be the bottom but I am not so positive on UP mills because elections have been announced in UP. I think the cane areas will increase further and there won't be any regulatory or state-related moves which can really control those kinds of things.

So there are at least 8-10 stocks which one can easily identify and even amongst the fertilizer space there maybe stocks such as Coromandel International which is the largest complex fertilizer maker. So you have a mix of agro-chemicals, fertilizer, equipment makers and all sorts of things which one can acquire in this space.

Q: You track Bharati Shipyard closely. What did you make of the debt recast and in terms of move for the stock, what kind of a target would you have?

A: Debt recast is the most smoothing move by the company. In fact, all stocks have started correcting when you have the fear of default and when you see the company is unable to meet their obligations. The same thing has happened with Bharati Shipyard. The moment we have seen that the board of directors have openly come out with it that they are moving for the debt recast package, which they will be presenting to their lenders- out of Rs 3200 crore, they are going for Rs 2700-2800 crore. That gives relief because your repayment gets deferred. You get moratorium on repayment for couple of years. Even the funded interest partly gets converted into the term loan or you get relief in all sorts of things. Apart from that, you get couple of interest points and reduction in interest rates. So definitely, the liquidity as well as the mild improvement in the profitability both comes along with this re-scheduling.

Until it does not happen formally by the company, fear remains. Once it is formally presented by the management, it is concluded that banks have no other option but to accept it. From thereon, one can start taking a positive call.

I see a lot of value in Bharati Shipyard if you see the order pipeline of Rs 6,000 crore and once this gets deferred, it can easily move or breach the three-digit marks, may be in the next couple of months. I am holding a positive view post this restructuring move by the company.