SP Tulsian in an interview to CNBC-TV18 shared his fundamental view on stocks that posted earnings like TVS Motors, ICICI Bank, MRF, CCL and others.
Below is the transcript of SP Tulsian’s interview with Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Anuj: You had said that May would be a tough series for the market, how much lower now from here on? We have already corrected almost 200 points from the highs. But, do you see further lower levels?
A: This is a classic case. If you see today’s behaviour, this is a classic case of market moving into the bearish zone. Because if you really see, market will never end, will go one way into the bearish zone or will go into the weak trend. In the morning it gave a deceptive rally thinking that market is looking very good. If you really go by the global data or maybe even the factors, which except for the core data, which looked positive for the January to March months, I do not think that there was any reason for markets to move so much up. So, yes, there will be a lot of confusion and this confusion only, the more you see the confusion or the volatility on an intraday basis, establishes that yes, we are going to see the weakness going ahead now. It is difficult for me to say whether the results will be the trigger or maybe this kind of, but I am keeping my same view that practically the majority of the days in the May series, I am seeing negative and I will not be taking a call on the index, but if you really ask me, I do not think that 7,500 or 7,600 will get respected. But these kind of intraday volatility may continue for two or three days but it will be difficult for the long trades to make money and things are remaining negative, view is remaining negative on the May series.
Anuj: A call on MRF?
A: If you see, I am taking a sequential call. If you see, the topline has increased by about Rs 200 crore, but if you take the last three quarters, the profit after tax (PAT) has been continuously falling down. If you see, Rs 460 crore was the PAT in September quarter, it fell to Rs 388 crore in December quarter and now fell to Rs 376 crore to this March quarter. And considering the natural rubber prices having moved to a level of about Rs 140 per kg and the kind of pressure which we have been seeing, actually the other tyre makers have become very strong or very aggressive. Ceat having added capacity to their Nagpur plant, JK Tyre having acquired the Kesoram Industries tyre division, so all these things are going to be seen tough for MRF going ahead. So, in fact, topline is increasing but the margin is seen shrinking as I gave you that sequentially for the last three quarters the PAT has almost corrected for about Rs 75-80 crore.
Anuj: You have been bearish on ICICI Bank. That call is playing out quite beautifully, but do you think not just ICICI Bank, but other economy facing stocks like the PSU banks run the risk of revisiting their previous lows, post the Q4 numbers?
A: I will not be surprised to see that horror game again being played after the Q3 numbers which we have seen in case of PSU banks, because if you just take the case of United Breweries group or Vijay Mallya, we have been in fact, that has been in the news for last about one month. Practically, the entire Indian authorities are after him, but have we been able to see the recovery? No.
Now see that today’s statement of the State Finance Minister on wilful defaulters list. Have you initiated any kind of moves against those defaulters because it seems that the entire focus or the entire energy of recovery has gone on Vijay Mallya. Take the case of this second this one – Winsome Diamonds, Jatin Mehta. He is a second wilful defaulter of Rs 6,000-6,500 crore. Do we know that that name, do we know the name of the companies who have been wilful defaulters. So, this is pity. So, in the process when the bank is, their entire energy is getting recovered and even that is proving futile, where is your focus on the credit growth and exactly, that is what has happened with ICICI Bank also.
So, maybe in terms of Modus Operandi (MO), you can say that ICICI Bank has exactly moved on the lines of the PSU bank and we have seen the trailer of PSU Bank Q4 numbers to be seen. I am not talking of the smaller banks like Andhra Bank and Allahabad Bank or maybe like UCO Bank. I am talking the larger ones, maybe like Punjab National Bank (PNB), Bank of India, Bank of Baroda, State Bank of India, Canara Bank, these kind of banks you are going to see the similar kind of things - credit growth is flat, asset quality is worsening and probably that will be the time you will have to again re look that what will be the situation going forward. I will not be surprised that after seeing the Q4 numbers, again the fundamental analysts like me will say that let us wait for the numbers of Q1 to be seen and then we will take a call.
Anuj: 7 percent lower on TVS Motor now, would you buy this dip or would you be concerned by this problem in the margins?
A: Actually, margin is a big concern, because if you see operating margin of 4.5 percent, EBITDA margin of 6.3 percent and why the bottomline is up because of the higher other income Rs 224 crore. And if you see the for the quarter, that tax liability, there is a very lower tax provision of just about 14.5 percent against an average of 24 percent. So, because of these two factors, you can say that other income has increased by Rs 13-14 crore, tax liability is lower by about Rs 10-12 crore. So, that has made that Rs 25 crore increase. Now, if you come, as Sonia has touched on the Africa point, this Nigeria is seen as a very big concern because if you see the ban by the government also, because there in Nigeria, the motorbike is used as a taxi, because people, a person drives the motorbike and takes a passenger on his backseat and that has taken a big hit. In fact, I do not think that there is any kind of sharp recover, because when I was talking to few people, they say that they are not seeing any kind of revival to be happening immediately.
So, yes things are looking quite bad, even on the margin front. Maybe the per unit realisations have gone up but I do not think that the efficiency has translated with the increase and whatever projections which the management has given of 10 percent margin seemed to be far-fetched, I do not think those things are going to get reflected. And apart from that if you see the run-up which has happened in the stock, it has moved up by about 12-13 percent in this last one month. The counter was also in an overbought position, people have gone very long, gung ho on the stock. So, that liquidation is also being seen now in the stock. Maybe at Rs 285-290 one can give a relook to the stock.
Anuj: Telecom stocks have rallied today, Idea, Bharti, even Infratel, Reliance Communications. What do you make of that?
A: Actually, the hearing got completed in Supreme Court and actually if you really see, probably those who have been in the court, sometimes can make out from the argument and maybe from the judges that what kind of order is going to come. So, even court was not very convinced in the earlier hearing also, where they have called up on the government on the TRAI and all to settle and sort it out because there has been all type of claims that telecom companies are trying to enlarge the figures of this penalty and all that. So maybe some positive judgement maybe coming in from the Supreme Court, that could be seen as a relief for the telecom stocks. Except for that, I do not think that anything is positive for those stocks.
Sonia: Just a quick work on a couple of more earnings that came out. CCL Products that had a very good set of numbers this time. And Cera Sanitaryware as well, either of these names you like?
A: Cera has given very good numbers. If you see the operating profit at Rs 44 crore against Rs 31 crore and similar is the case with PAT of Rs 30 crore against Rs 20 crore, earnings per share (EPS) of Rs 23 for the quarter, I am very bullish on Cera Sanitaryware. But coming on CCL products, because this stock has already seen a big run-up, results came in last evening and we have seen the share prices moving up. So, I will not be taking a call now on CCL products at the current level.
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