Feb 06, 2013, 08.48 PM | Source: CNBC-TV18
In an interview to CNBC-TV18, SP Tulsian of sptulsian.com gives his views on a few multibaggers. On IRB Tulsian predicts the stock to move to Rs 140-145 level in the next 15-20 days.
SP Tulsian (more)
CEO, sptulsian.com | Capital Expertise: Equity - Fundamental ,IPO
"IRB's Earnings per share (EPS) of Rs 4.40 or closer to that, will probably revive the interest and unless and until we see any kind of negative news coming in which we have been seeing in the past, the share can move to about Rs 140-145 in next 15-20 days or so."
Below is the edited transcript of Tulsian's interview to CNBC-TV18.
Q: What did you make of the commentary from the IRB management? How do you see the stock move from here?
A: There are two triggers for the stock. First is the Reserve Bank of India (RBI) allowing the FII limit to be raised to about 49 percent in the company. The entire limit will not get exhausted because the promoter stake is close to about 60 percent, but there will be room for the foreign institutional investors (FIIs) to buy the stock in the company. Also, EBITDA of Rs 408 crore is looking good because sequential; there is an increase of Rs 380 crore EBITDA in the Q2. They now have Rs 408 crore EBITDA. Earnings per share (EPS) of Rs 4.40 or closer to that will probably revive the interest and unless and until we see any kind of negative news coming in which we have been seeing in the past, the share can move to about Rs 140-145 in next 15-20 days or so.
Q: JP Associates has lost 3.5 percent for the day. It lost 11 percent this week and a total of 25 percent in 2013. What is the word on the street which is resulting in this relentless fall that we have seen?
A: All the cement stocks have started faring well. Infact, we have seen the infrastructure stocks also doing well, largely the power generation ones. I am not saying that JP Associates has any connection to that, but they do have the engineering and construction division. They have presence in cement. I fear that no progress or nothing we have been hearing with respect to their sale of the Gujarat cement plant probably is disturbing the the market. On top of it, the Qualified institutional placement (QIP) which they have done is already seen quite negatively by the market. So, overall once some news comes in with respect to the Gujarat cement plant, the stock may not see good amount of up move again.
The kind of shorts we have seen being built up in the stock, especially in these last three days including today, they can probably be seen as a positive trigger. So, Rs 70 should be seen as a good support for the stock because the fundamental call will start coming in on the stock as quite positive. So, as of now I am negative, but I don’t think that here one can really extrapolate the present trend for the remaining part of the series.
Q: What is the sense that you got about the price pooling mechanism that has been put into place now? Although implementation will be a hurdle, but do you think this is a good time to be putting some money into some of these power names like Lanco Infra , Adani , etc?
A: This is a good beginning. The government has deliberated for last eight -12 months and nothing has happened. Atleast now some move got initiated. I don’t think that there is any kind of implementation hurdle with respect to the implementation. Coal India can very well source the coal and that can be a big relief for all the power generation companies. As far as the logistics part is concerned, the price quoted by the Coal India can be on the export basis because you can decide four or five destinations and accordingly, each power consumer can make use of that.
Infact, this will largely benefit the companies those who have either created a huge capacity or those who have a good pipeline, capacity creation pipeline. Adani Power has a capacity of close to about 6000-7000 MW, Lanco Infra has a pipeline of 4000-4500 MW. So, with all these things Reliance Power will not stand to gain much because a majority of their things are on the ultra mega power project with three ultra mega power projects. They are not too much worried for the rest of the capacity. However, overall I see this is as a big positive and this will have a positive effect on the power generator as well as the power finance companies also. The power rates will get increased. And those who have signed the power purchase agreement (PPA), once they have their fuel supply agreements (FSA) in place along with the existing FSA, then if they have the 80-90 percent assurances of the feedstock, then maybe the PPA will also get suitable if revised and changed.
So, overall there will be a drastic or a radical change in the whole sphere financiers, power generator and the discoms. I see this as a big positive. The only thing one has to see is how the modalities get crystallised. If those things can be done quickly, maybe in next 15-20 days, then that will be seen quite positively.
Q: What about Coal India ? It was expected to be revenue neutral, but today that stock has lost about 2-2.5 percent. Is the street fearing in negative impact on Coal India or is it just generally down?
A: I don’t think Coal India will really be taking the structuring of the pooling mechanism in such a way that will be seen in anyway negative for them, either on the earning negative or maybe the revenue negative. Overall, I don’t think that, that will really be too negative. However, market is quite apprehensive. The market is feeling that to make this power generation companies survive, Coal India may probably take some negative steps towards that. The ramping up in the production of Coal India has not really happened significantly in FY13, they have been languishing closer to about 450 million tonne of production and it will also get ramped up in FY14. So, I don’t see any reason for the stock to correct. If it falls below Rs 330, probably that will be seen as a good support and the buying may come in, but right now market is little worried and is seeing this as a negative for Coal India.
Q: All the talk about sugar decontrol has resurfaced, but for someone who wants to put in fresh money would you advice this as the time and if yes which stocks would you look at?
A: The levy has to dismantle Whether it happens today or may be six to 12 months down the line, I don’t think that, that is going to put too much subsidy burden on the government. The central government will need to incur additional cost close to about Rs 1500-2000 crore. So, if you go on that premise, the average realisation on the entire quantity produced by any sugar mill will be anywhere between Rs 1.50 to Rs 1.75 per kilogram because the levy is now sold with a differential of about Rs 12-14 per kilogram between free sale and levy. If one has that in mind, then he can probably look for the largest producing sugar company in the country. First is Bajaj Hindustan , but we haven't seen the efficiency and profitability of that company coming in. Second is Balrampur Chini . My first preference, based on that one factor of the dismantling of the levy alone will be Balrampur Chini followed by two or three mills from the UP belt. It could be Triveni because they also have a very large capacity and then followed by Renuka because even Renuka will stand to gain to a great extent from that. One has to be very selective because operational performance of the sugar companies for this season, especially from the UP belt are likely to be quite dull and negative.
Q: What are your thoughts on Bajaj Electricals ? This time around, year-on-year the numbers have seen quite a bit of a degrowth, while sequentially they look good. Would you buy the stock now or would you stay away?
A: I found the results to be quite disappointing. Even its quarter-on-quarter numbers are not very convincing. If you really see the kind of performance that the company has posted and infact, the kind of volatility that we have been seeing in the share price is also not giving comfort. So, I am not at all convinced with the numbers and hence will remain away.
Q: What are you expecting from Manappuram General Finance numbers today?
A: Its Q2 numbers have been very bad and if they post a bottom-line of less than Rs 140 crore that is going to disappoint because Q2 had a bottom-line of close to about Rs 110 crore, but that was an aberration. You can’t expect a similar performance to be repeated by the company in Q3 also. So, I am expecting about Rs 135-140 crore atleast as the bottom-line from the company.
Q: The NTPC offer for sale (OFS) is tomorrow. What would you recommend investors to do if the price comes between that Rs 145-150 level. Do you also belong to the camp like many analysts who suggest subscribing into this one?
A: I have been giving a price of Rs 142 because the Government has to really be very cautious. In such a big size issue, I don’t think that foreign institutional investors (FIIs) will really be too enthused in the issue and if the OFS comes at Rs 145, then it will be seen quite aggressive. Infact, I am not expecting very good response from the FIIs to come in. Probably Life Insurance Corporation (LIC) and the other insurance companies may have to subscribe to this and I am expecting that more than 60 percent of the chunk will be taken by these insurance companies. So, it all depends on the floor price.