Why Tulsian likes Crompton Greaves despite poor Q1 results

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Crompton Greave BSE | NSE 29/05/12 Are Mutual Funds betting on Crompton Greave? Other Stocks in this news Indowind Energy | Williamson Magor and Company | Mcleod Russel (India) | Eveready Industries India | GTL Infrastructure | GTL | Amara Raja Batteries |

Crompton Greaves ' results were dismal for it's first quarter of FY12. ( Click here for results ) Consolidated net profit dropped nearly 59% to Rs 79 crore against Rs 190.8 crore in the year ago period. This was very much below the street's expectations, but SP Tulsian from sptulsian.com still maintains a positive view on this sector.

"I think the stock will settle at around Rs 200 plus; could be anywhere between Rs 205-Rs 210. The renewed interest will comeback at those levels" he tells CNBC-TV18 in an exclusive interview. 

Below is the verbatim transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy. Also watch the accompanying videos.

Q: Do you keep an eye on Crompton Greaves because you track the sector quite closely?

A: Yes, I do. Maybe the expectation was that there was the kind of behavior which we have been seeing in the stock, that the institutional or the large investors have seen exiting from the stock. But I think taking all this into account, if the stock corrects to Rs 200, which in my view looks unlikely, maybe it will settle at around Rs 200 plus; could be anywhere between Rs 205-Rs 210. The renewed interest will comeback at those levels.

Overall, I am maintaining very positive view on this sector. I don't think that this can get extrapolated for remaining three quarters of FY12. So I will be seeing this more as a buying opportunity close to about Rs 205-210 for the stock.

Q: You have been a bullish on this sector and on the stock. After seeing the numbers today, you did mention ofcourse that it's a good thing to buy it at lower levels, but would you suggest at this point that someone enters into the stock or would you wait by for more clarity from the management on various divisions including the power systems segment and what's happening there?

A: I agree that management clarification is very important, but the technical position takes about couple of days to get settled because the long positions will get settled, the short positions will get covered and all sort of things. In this process, I think we would be seeing a price of Rs 205-Rs 210.

I find that stock is likely to settle between Rs 205-210 because if it breaches Rs 200 or it comes to sub Rs 200, obviously that throws another opportunity to accumulate more. I have been taking the fair valuation on the stock between anywhere Rs 205-210.

So definitely a value investor should wait for couple of days in this time. You will be hearing the management as well. But I don't agree with Udayan's view, I won't be taking it as a fly by night operator; a fly by night kind of company. You see this kind of one of results for the company and things should bounce back maybe in the next couple of quarters or so.

Q: What is going on with Indowind Energy ; the stock goes up 10% one day, comes down 20% the next day. Do you keep an eye on this name?

A: I have never got convinced with this stock; see the behaviour or the moves made by the company. They went public in August 2007; they mobilize Rs 80 crore from public. After three to four months we have seen FCCB of Rs 135 crore. Now couple of months back we have seen GDR issue again of about Rs 80 crore. If you see the kind of performance the company has posted for nine months, they have changed their accounting from ending June to ending March and they have posted an PAT of about Rs 13 crore for June ending 2010, I am not including the deferred tax of about Rs 6 crore, which has got added into the PAT. But if I take the PBT at Rs 13 crore, they have posted at Rs 4.5 crore.

Honestly, I don't see any business model. In my view, this is seen as a very weak company. All kind of gimmicks are resorted by the promoters just to mobilize the money. How long they can really continue like this, god knows.

Q: You flagged off a big rally in Williamson Magor the other day but do you think it is done what it had to do or do you still keep holding it?

A: It has corrected today largely because the stock is going into trade from this Friday. But, because I have been taken my valuation call on the stock on the channel, I revealed that the company is holding about 120 lakh shares in Mcleod Russel , value of which is Rs300 crore plus; they are holding 160 lakh shares in Eveready ; the kind of real estate they are holding in the form of land and building.

So if you add all together, the net asset value (NAV) per share comes to about Rs 630-650 per share. Though the stock was recommended by me at Rs 650 and now it is ruling at Rs 670, if you take all the investment companies, they have been ruling somewhere at 25-33% of their NAV.

So even if I take a 20% on the lower side of the NAV as the benchmark price for the stock, I think it has a lot of steam. But one should not expect that to get revealed or reflected into the stock price in next couple of days because we have already seen run-up of about 45-50% having taken place in this last one week.

So my positive view is definitely maintained. The correction is largely because of the technical factor of stock going into trade-to-trade, but my long-term view over next 6-12 months of price target into three digit, anywhere between Rs 90-100 is maintained.

Q: We have spoken in the recent past about GTL and it's just does not seem to have the energy to get above a Rs 100. Where do you see the stock bottoming out finally, today languishing at Rs 80?

A: I don't think that there are any hopes of valuation increase happening in both the stocks. GTL Infra , the smaller one is holding maybe because of the lower value and all. I think the more problem lies with GTL because of the investments they are holding in GTL Infra.

I expect that share should settle anywhere, because if you take a call by combining the debt of both the companies at Rs 12,000 crore and the kind of assets they have all been holding about 33,000 towers in GTL Infra and the core business of GTL. Taking that into consideration, the realistic value of GTL comes to at about Rs 60-65, because earlier I was taking the valuation call at about Rs 75 to Rs 90 on a broader range. But the kind of corrections or the kind of liquidation which we have been seeing makes the realistic valuation at anywhere about Rs 60-65.

Q: In the broader markets, Exide will be reporting its numbers tomorrow. You have been quite bullish on that particular counter. How do you expect it to do?

A: Expecting better results, because except for Q3, I don't think that that was just an aberration. If you go by the zinc prices, they have been quite steady and that is a very positive feature for any battery maker, because if you take a call on Amara Raja or may be the Exide industry, zinc constitutes 70% of the raw material component of any company.

So I am expecting Exide is likely to post better results and that will in fact indicate that going forward for whole of FY12 the results are likely to be quite good. I am maintaining my positive view because I have been taking a Rs 200 price target on the stock by end of this year.