Tulsian reviews capital goods, real estate stocks

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

Q: Tata Motors DVR has been a big mover today. Morgan Stanley has added it to their list, but do you expect the discount to narrow further? What kind of a target price would you have?

A: The reports suggest that the discount will fall to as low as 40%. They have given comparison of global discounting, but I don’t think that it is likely to happen. It all depends on the sentiment because whenever you are running short of ideas or when you find the stock expensive you come out with this idea. We have seen the discounting rising as high as 50-51% in case of Tata Motors DVR. It makes sense because if you take a general call I don’t think it should rule at a discount of 30-35%, but that has never happened.

The same case has been prevailing for Jain Irrigation DVR because there are no other prominent DVRs ruling in the market. I don’t think one can take an objective yardstick or benchmark that it should be the discounting factor which should get applied to DVR. It gives one of the investment ideas that instead of Tata Motors if you are an investor with at least a time horizon of six months, there is no harm in buying Tata Motors DVR.  We are also approaching the dividend season where one will be entitled to receive 5% extra dividend. So, these ideas are coming out, but it is difficult to say that discount in share and DVR can fall to 35-40%.

Q: What is your view on BHEL ? It is more likely that 19% import duty on power equipments may come through. What kind of levels are you watching for in BHEL?

A: I have been maintaining my positive view on all the capital goods maker and specially stocks like BHEL, BGR Energy , Thermax , L&T , ABB and Alstom Power . The moment we see fuel supply agreements being signed by power generation companies, there will be a mad rush.

I won’t say there will be increase in orders. But, pending orders of each company is going to get executed over next 30 months this is because March 2015 is the deadline for completion. So, all the supply has to get completed by July to September 2014.

Because of this clear picture I have been maintaining my positive view on all these stocks. Apart from that, we now don’t have fear of stake sell by the government. So, the stock can move to about Rs 335-340 in the next couple of weeks or so.

Q: Is there any kind of stock that you would pick up at these levels after the run up seen in real estate stocks like HDIL , Indiabulls , Sobha Developers ?

A: Stocks like HDIL, Indiabulls Real Estate and DLF who have presence in F&O segment have risen in last one month by about 40%. That is to catch up or fill the gap in F&O or with smaller real estate stocks like Ajmera Realty , Prestige Estates . So, the bridge is gapping.

I don’t see any fundamental reason because projects which are under execution by all these developers have very tepid booking response. Even debt positions and leveraged balance sheets are not getting eased off in spite of sales of their completed projects.

I wont be taking a fundamental call because one will have to wait for a correction of 15-20%. There is a general increase in all the stocks, which have taken a beating in December. But these stocks seems to have risen more than they deserve. One should look for a correction of 15-20% to enter these stocks from an investment angle.