SP Tulsian's views on stocks/sectors

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In an interview with CNBC-TV18, SP Tulsian of sptulsian.com spoke about his reading of the market and his outlook. He also gave his views on the buzzing sector/stocks and his preferred picks.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Some of these textile stocks have been doing rather well and they have been in the news. S Kumars is talking about Reid & Taylor initial public offering (IPO) and Alok Industries is talking about raising money in qualified institutional placement (QIP). If you had to buy one or two stocks from this space-what would those be?

A: When you talk to the textile people-the bullishness has started from the spinning sector, which has all percolated to integrated to as low as the garment makers also-whether you talk of processing, weaving and garment making. But when you talk to them they say they have not seen this kind of thing happening in the last 10-15 years. My view is that whenever you see this kind of cycle, which comes once in 10-year because textile is a typical ten year cycle which we see once in ten years this kind of revival happening. So I think the time has come.

I am not saying one has to exclude stocks like Alok Industries or something like that but majority of these stocks are ruling at a PE multiple of 4-5 with a good earnings per share (EPS). In many of the cases, you see EPS of the companies in double-digit with virtually no debt and whatever debt or loan you have been seeing in the books is largely to finance the working capital of the company, which cannot be considered as a debt, if it is amply backed by the current assets or the inventories or the book debts.

So the revival is going to happen and that is going to last for one year and if somebody can pick and choose the right stock, you can expect return of as high as 100% also in this segment.

But as I said my view is more on spinning sector. So my stock pick could be Vardhman Textiles , Century Enka or Siyaram Silk Mills . These are few stocks, which looks quite interesting. They have an EPS of close to about-in Siyaram Silk Mills it's more than Rs 30, in Century Enka it is about Rs 60, in Vardhman Textiles is about Rs 40. In majority of the cases, may not be the case with Vardhman, but in case of Century and Siyaram-both are debt free company. One can choose these stocks.

But the only caveat is that you need to have a time horizon of six months because generally traders get tired when they do not see the stock moving up in next one week or so but I think with a time call of six-months some of these stocks looks very good.

Q: We have been discussing Pipavav Shipyard for a few days now. Even if the stock has bottomed out around Rs 50-52 levels how much upside do you see from here?

A: It all depends on the order flow because as we have been discussing when the company went public that this is the only company, which can replace the demand or which can cater to the Indian Navy and ONGC. Because the major order of the refurbishing or of the repairing is going to South East Asia and to Russia by Indian Navy and the kind of information gathered from the management that two-four rounds of visits have all been completed by them-we all know that it takes a very long process.

I have no idea about the recent progress happening on those counts. But I don't think that one can take a call of company catering to the usual kind of business with the kind of third largest and world-class facilities. So once you see those orders start flowing in-in fact, in the recent past maybe in last one week or so, we have seen the huge delivery based buying happening at the institutions level.

So maybe they have some clues because the stock has been covered by in the recent one-two conferences held by the broking houses. At least I hold a very good long-term potential on the stock. As you rightly said that it looks to have bottomed out at about Rs 50-52, company went public at Rs 58 or so. My upside target could be about 40-50% over next six-eight months from the current levels.