Jan 12, 2017, 07.49 PM | Source: CNBC-TV18
In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on specific stocks and sectors.
Below is the transcript of SP Tulsian’s interview to Anuj Singhal Sonia Shenoy on CNBC-TV18.
Sonia: The space that is really rocking now is the power space. All these stocks sitting at fresh 52-week highs. NTPC , Power Grid , Tata Power , all up about 3-6 percent. From this entire space, what is your pick of the lot and what do you see as the triggers hereon?
A: Probably, this is a follow-up buying in the power generation because if you see the kind of spending the Capex, seen in the transmission and distribution (T&D) space and if you have the efficient T&D infrastructure in place and with the health of the distribution companies (discom) not seen improving after this UDAY bond, naturally, the market is expecting that probably the power generation, the power lifting, because there is demand of power.
Even today, we are seeing the load shedding practically pan India. But that may be because of poor T&D and poor financial health, the things were not seen getting lifted from the power generation. So, now on that hopes probably they have seen all this buying seen coming in. But I do not think that things are likely to be seen any kind of improvement for the next 6-8 months.
So, maybe because and given the current situation when you have the positive call on the other sectors and other stocks, generally, what has seen happening in case of power generation which we have seen this kind of rally in the past also. Maybe in respect to some electricity regulator order coming in, in respect to Adani Power, Tata Power or maybe for any other reasons, this rally has not seen being sustaining.
I will not be taking my positive view on the stock as an investor because if you really enter into the stock, probably they go into sideways for a couple of months and that is really seen to be very dull and boring and flat kind of returns not seen coming in. So, you have to make your capital productive where on a relative basis, the better returns are seen available in other stocks and other sectors.
Sonia: Zee Learn is a stock that you watch closely and just a word on the prima facie numbers that we are seeing?
A: Numbers are definitely looking good and actually, the only disappointment has been on the corporate governance in respect to the Tree House Education and Accessories merger. Because if you see, I have been keeping a very positive view on this education space and in my view, there was only two pan-India players having shown their significant presence.
One is the Zee Learn and unfortunately, Tree House has run into all these problems. On a standalone basis, I mean to say, without going for this merger of Tree House Education and Accessories, the results are looking very good because these two babies amongst the Zee stable, that is Zee media and Zee Learn, both are holding very good potential and I am keeping a positive bias on both the stocks.
Sonia: The other stock I wanted to discuss with you is Biocon . It has hit a new high now and there is a lot of positive news flow coming on that one, especially with the application for its breast cancer drug being approved by the US Food and Drug Administration. Any thoughts on how long-term investors can approach this?
A: Definitely this is a positive news for the company front. But as such, because as a policy, we have been keeping a neutral to cautious view on all the pharmaceutical stocks. And as stock having risen almost by about 100 percent in this last 12-15 months, I will not be taking, because the kind of volatility we have been seeing in the stock, sudden up and down of about Rs 50-60 is definitely scaring the investors and even the traders also. So, maybe those who are holding the stock from a longer time, they may continue to remain invested or even to them also we will advise a profit booking. So, as of now, this is news is seen having largely factored into the price as well.
Anuj: We have discussed it at the start of the show, but space of today has been power, anything that stands out where investors can make money even from here?
A: Actually, this is what I have been hearing. One stock that comes to mind having strong fundamentals, that has gone unnoticed is Gujarat Mineral Development Corporation (GMDC). People feel that this is the only natural resources company but they have lignite mining that lignite, bauxite and maybe manganese.
If you see, lignite is a coal substitute. It is lighter kind of energy which is 30 percent cheaper coal and they have their own mining. Apart from that, they have the power generation capacity of 250 megawatt thermal power and 200 megawatt of wind energy. And if you see, on the balance sheet front, the market cap is Rs 3,200 crore. The company is totally debt free. And of that, about Rs 1,600 crore are lying in the cash and cash equivalent.
That means, you are getting the company for Rs 1,600 crore. And the earnings per share for the current year is expected to be at about Rs 12 because they have already posted an EPS of Rs 6 for H1 and if you see the dividend track record, Rs 3 dividend is being paid by the company continuously for last five years with government of Gujarat holding about 75 percent stake in the company.
You have a natural resource as mining that is lignite, manganese and bauxite and apart from that, the power generation which is a profit making company. So, I do not think that there can be any other company having such a good combination and amongst the power generation company which is having a debt free balance sheet and even if you take this 700 megawatt or maybe 600 megawatt power project, that alone gives you the net present value of closer to about Rs 2,000 crore. So, at that point of time, you have initially asked me, but I was just trying to, so this GMDC looks quite interesting and I think the stock is now ruling at around Rs 103-104. So, it has a potential to maybe to move to a level of Rs 135-140 maybe in the next couple of months and it is an excellent stock looking for the portfolio.
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