Buy Jet Airways; cautious on Marico: Tulsian

On Marico , he is not comfortable with the valuation of the stock. Their skin care business is facing rough weather. He also says that Marico don't have a wide diversified portfolio in FMCG space. The stock has strong resistance at Rs 196-200.

Below is the edited transcript of his interview to CNBC-TV18.

Q: What is your view on the latest development in Gujarat Gas and how would it impact them?

A: It is strange that the strategic investor is planning to bidding out due to fall in share price. There is no dispute that it is a priced asset. The June quarter result has been very dismal. If ONGC cites subdued profitability or un clarity on the situation ahead on the gas carriers can be understood as the reason but withdrawal from the bid because of fall in share price looks strange.

Infact the consortium of GSPC, a state undertaking and ONGC, a central government company, are two different ruling parties and people also say that is a reason for non-alignment of the potential strategic acquirer i.e. GSPC and ONGC.

If they redraw their strategy and plan to acquire the stake because in the earlier bid, we have seen Adani and Reliance Industries both exiting from the stock, which otherwise would have given stiff competition to these acquirers. So even if they redraw the strategy and they look to acquire at Rs 280-300, I think the assets of the Gujarat Gas are attractive at those valuations.

Q: What is your view on Jet Airways post results?

A: Surprisingly, the bottomline has been black for the company on account of other income of Rs 124 crore from sale and lease back that happened in the Q4 to the extent of Rs 51 crore, which resulted in lower depreciation and lower interest.

The disappointment is more on the revenue front despite black bottomline. Considering overall results and chances of getting FDI in aviation sector sooner or later, Jet Airways looks a good buy. I am keeping a positive stand on Jet Airways.

Q: Due to monsoon the outlook for many companies may look bleak and Marico has mentioned that in their results this time around, would you be concerned?

A: I maintain a cautious stand on Marico. But, if you see the stiff valuations, Marico has always enjoyed the lowest amongst the lot whether it is Dabur , ITC or HUL . ITC and HUL are the undisputed leaders. With the given valuation I won’t be too comfortable with the stock. Their skin care business is facing a rough weather and practically they don’t have a wide diversified portfolio in FMCG space. The stock has strong resistance at Rs 196-200.

Q: What is your view on Sun TV ?

A: The numbers are on the expected line. Going forward, the Asru tie-up which they made some days back will help the company to give them profitability as their analog division is not raking in revenue. The only caution is the CBI chargesheet or the allegations against the Maran brothers, but otherwise I have a positive stance on the stock. The EBITDA margin at 78-80% is quite strong for the company. Operations on both top and bottom line are on the expected lines.

Q: What is your view on OnMobile Global which has rallied today?

A: In last 10 days we have seen value buying in the stock. After the change in senior position and non fear of any financial irregularities or manipulations which was earlier apprehended. In last one week there has been huge delivery based buying at Rs 37-38 levels. From hereon, things are looking good and from current level the stock can move to Rs 46-48 in the near term.

Q: Is there any opportunity that you see in Deccan Chronicle , it has lost about 30% this week?

A: No, not at all. There is no point in exposing yourself by either indulging as a trader or as an investor because of the contradiction or confusion which we have seen in the stock.

The company last year completed a buyback of Rs 250 crore inspite of Rs 300 loan in the books and cash and bank balances of Rs 700 crore. The company is indicating a fall in ad revenue which is not evident from their numbers. I think the company has a debt of less than Rs 500 crore.

One is unable to connect the financials of the company with the statements. There is no reason for the company to go for the entire pledge of the promoter’s stake with market cap now falling to Rs 300 crore. Fundamentally, the stock may look very good but if somebody dig or carry out the investigation, I think more skeletons can come out of the closet.

Q: What strategic sense do you think this deal would make if DB Corp does come in and bailout Deccan Chronicle?

A: If you look at the business structuring of the Deccan Chronicle, they have print infrastructure and ownership of the Deccan Charger, though they have written off that in the balance sheet for the accounting purposes but they have the ownership of the Deccan Charger. If the deal goes through it will give then a ready platform.

Deccan Chronicle has launched two-three new editions and forayed into Kerala. I think it will look easy as 74% stake is vested with the promoters and 6% by the LIC. Deccan Chronicles has a marketcap of Rs 330 crore and with a debt of Rs 400-450 crore, the enterprise value is Rs 750 crore.

I don't say that the deal will get structured or concluded at the current rate but one has to see what terms it decides to move on whether the print infrastructures is retained by the Deccan Chronicle promoters and they carry out the job work they only handover the media business to the DB Corp promoter but it makes a business sense for both of them.

Q: Deccan Chronicle has moved up about 5%. Would you advice any trade on Deccan?

A: This is more positive for Deccan. If Deccan would have remained in limbo there is no point in dabbling into the stock but now that it has a 5% circuit limit that is why you see it frozen at close to about Rs 14. If the deal fructifies than the share has the potential to double. But I don't expect same kind of euphoria to happen for DB Corp because the stock has moved to 16-18%.

So, if any deal happens on reasonable terms will be seen quite expensive from the current valuations, will not be seen positive for DB Corp. I have a cautious stand on DB Corp. One should not be too gung-ho on DB Corp which has already moved 16-18%.

Q: United Spirits is up 20% this week at Rs 870-880. The company came with average set of numbers?

A: The numbers are quite good. The performance in Tamil Nadu and West Bengal has not been satisfactory because of state regulation. If the company had got the required quota then volume growth would have been better. EPS of clos to Rs 11 is an indicator going forward. So, this is coming back to old trajectory of posting an EPS of Rs 40-50.

But I do not think that this optimism is lying in the results or in the financial performance of the company. There are talks that Diageo is very keen to acquire the stake. The company has also sold more than 30 million cases in the first quarter, which indicates that a volume of 130 million cases for FY13, which is comparable with Diageo.

On volume front, both are neck to neck. It is also learnt that Mallya, who holds 30% stake in the company may consider selling part of the stake which is likely to happen at a soeculative price of Rs 1,200-1,500 per share. So overall taking a positive view on the results as well as the events lined ahead for the stake sale and all.