Can you bet on IVRCL, HCC, Dhanlaxmi now? Tulsian guides

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Can you bet on IVRCL, HCC, Dhanlaxmi now? Tulsian guides

SP Tulsian, of sptulsian.com in an interview to CNBC-TV18 shared outlook on stocks across various sectors.

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Excerpts from After the 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

SP Tulsian, of sptulsian.com in an interview to CNBC-TV18 shared outlook on stocks across various sectors .

Below is the edited transcript of Tulsian's interview with CNBC-TV18. Also watch the accompanying video.

Q: Is there any stock in the infrastructure space that you would like to bet on for medium term?

A: I have been maintaining my positive view on IVRCL Infra largely because of management's move of merging IVRCL Assets and subsequent monetization of real estate stocks they have. The best part is that they will be extinguishing equity held by IVRCL Ltd in IVRCL Assets. In case of HCC , their entire focus is on Lavasa. Their focus on other projects which may be their core area has been missing. The company has now realised their mistake of giving step motherly treatment to the main business. They are trying to recapture their market share in various segments.

Last year they created four verticals, but we have not seen any achievements in those. HCC is an old company and is in existence for last 50-60 years. So, that is really good for the company because they cannot totally rely on Lavasa. They need to have operational cash flow which can keep the company running and can give it independent valuations. So, this is a good move that they are refocusing on their core strength and trying to capture orders. Since the last couple of months, this seems to be their third order. So, this is positive, healthy and comforting news for the stock.

Q: What did you make of the news on auctions being allowed for the large companies? Do you think today's rally in Hindustan Copper or STC might have something to do with that?

A: Possible. In fact for the last four days, MMTC , STC and Hindustan Copper have been seeing this kind of activity. The government's stake is at 99.4%, and this can help these companies. But you sometimes tend to wonder whether the auction process can really help both these companies beyond a point.
For MMTC, I don't think that true value can really be taken at more than Rs 150 while it is ruling at more than Rs 500. The story is the same with Hindustan Copper; I am not going purely on the earnings, I am taking the call considering the copper-ore reserve the company has too.

Nonetheless, I don't think that Hindustan Copper has anything to do with that window which has been contemplated by the SEBI for dilution of government stake because as such, the government has been given time till next year. That's my knowledge that the application is till 7th June or 9th June 2013. That doesn't apply to these government companies. I don't think that one can really apply this logic of such a sharp up move which we have been witnessing in STC, MMTC and Hindustan Copper purely because of this factor.

Q: What do you do with the beaten down metals now. The stocks like JSW Steel particularly have done very well in the last couple of days, while Sesa Goa has slipped after the export duty news?

A: I have been maintaining my view on Sesa Goa in spite of the news that export duty has been raised to 30%. I don't see it falling below Rs 150 and that call was taken yesterday also. This is because of a simple reason - at Rs 150, we take the market cap Rs 14,000 crore and add Rs 4,000 crore debt that comes to Rs 18,000 crore.

This is backed by Cairn India 's investment of 20%, which has a market cap of close to about Rs 12-12.5 thousand crore, I don't think anybody can have apprehensions on that investment. So, one is getting the core business at a enterprise value of about Rs 6,000 crore. I am not too particular about the FY12 working of the company, but in FY13, they should be able to post an EPS of Rs 38-40. With this kind of performance and the valuations having taken a beating, I think the Sesa Goa holds value.

I have been keeping my positive view on nonferrous metals. This is a great respite for JSW Steel if the Sesa Goa curtails their export duty, which is likely to happen. If that happens, part of quantity of iron ore can get diverted to the domestic market, which will keep prices under check and there will be easy availability. That will be very positive especially when JSW Steel has increased their capacity to 11 million tonne. They will require that kind of quantity on a regular basis. Because of this 30% export duty this has been seen as positive news for JSW Steel.

Q: There is some news on recapitalization for banks. Do you have any favourites in the midcap banking space?

A: Recapitalisation may not apply to private sector banks. But, I am holding positive view on Dhanlaxmi and DCB . Both look good because at these levels, they have seen a lot of correction. I don't think they are too much bothered by asset quality. They are ruling at very low valuations and downside is limited from here. One can have a look at these two banks.