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Jul 16, 2007, 04.44 PM IST
VK Sharma of Anagram Stock Broking is bullish on stocks like Allahabad Bank, Corporation Bank, and Jay Bharat Maruti, but would give a miss to Aro Granite.
Excerpts from CNBC-TV18ís exclusive interview with V K Sharma and Sharmila Joshi:
Q: What do you like about the numbers of Allahabad Bank ?
Joshi: Based on the numbers that Allahabad Bank has given, we have seen very strong growth in terms of net profit.
We have seen non-performing assets, or NPA, levels drop and capital adequacy ratio has been maintained. Given the kind of valuation that it is trading at to its book value, it seems that Allahabad Bank is a hit according to me.
Q: Why did you not like Aro Graniteís numbers?
Joshi: If you look at the whole year, they seem kind of flattish. The profit for this quarter has been marginally lower, about 11% lower, than the corresponding quarter last year.
The company had said that they are going to be expanding capacity, which was expected to come online by December 2006. So, by this quarter, some of that should have started reflecting, given the kind of strong demand seen in the export of granites, etc.
In terms of valuations, they look all right. It does not look like an expensive stock but, nonetheless, the numbers were slightly disappointing.
Q: Why is Finolex Industries a miss for you?
Sharma: It is largely because most of the income has come out of other income and there is no guarantee that the other income would continue in the future as well and especially to that quantum.
The margins have fallen considerably from around 12% to something like 5.8%. That is a concern; but this stock will not go down as much because of the further plays, which the market does expect, especially on the land that it has and also due to the increased capacity that will go onstream later during the year.
Q: Do you like the GSFC numbers?
Sharma: I like the numbers. We knew the Baroda plant was down for almost 64 days. But the surprise has come from the Sikka plant, which has done well.
In the next quarter one expects slightly lesser amount of profits from the overall operations because the effect of the closure of the Baroda plant would be felt in the next quarter.
Going by the fact that fertilizer is a long-term story and the company happens to be a PSU, which might be on the block after the Gujarat elections. This is a stock, which can be picked up at declines.
Q: What did you make of the Corporation Bank numbers?
Joshi: It is a good set of numbers and there has been good growth in profits. Perhaps, the only negative has been that the net interest margins, or NIMs, have not been maintained. The income they earned, on interest from their investment, has gone up.
Looking at the kind of book value that Corporation Bank is trading at and the numbers they have done in the past, it seems like a hit and a good set of numbers from Corporation Bank.
Q: Did you like Jay Bharat Marutiís numbers as well?
Joshi: If one looks at this quarter numbers, the profit they have given is more than the entire last year profits. This company definitely deserves a closer look though auto ancillary is not the best and most liked space to be in now. But the valuations do seem a little cheaper than some of the other auto ancillary stocks. So, that is again a strong set of numbers from Jay Bharat.
Q: Was Tata Metaliks a hit this time?
Sharma: Yes, Tata Metaliks is a genuine hit because the profits and the margins have also gone up. Therefore, with the steel industry looking good for the coming quarters, this is one stock, which can continue to do well.
Other triggers for the stock could be the ductile pipe plant, which will come up. The Maharashtra plant might be ready in the coming quarter as well. So, these are some other things, which might add up. One can stay invested in Tata Metaliks at current levels.
Q: Why were you disappointed with Gujarat Alkaliesí numbers?
Sharma: The numbers are good in absolute terms but there is a concern in terms of margins, as we have seen an erosion of 5.8% in opium. Also, the caustic and the chlorine prices were under pressure during the quarter.
This is a stock, which has good carbon credits and there is also the fact that 200 tonne of further capacity will go up and take the total capacity to around 1,100 tonne of caustic soda. That should augur well for the coming quarters.
Despite the slight drop in margin, Gujarat Alkalies has slightly more land and therefore, one could stay invested. The stock also has 0.5% stake in Gujarat State Petroleum Corporation. So, whenever that stock would get listed, some value locking would happen here as well.
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