Tulsian positive on IGL, Crompton, Cummins and Thermax

In an analysis of the day's trading, market analyst SP Tulsian of sptulsian.com picks  IGL as a favourable stock with a target of about Rs 265-270. He is also positive on Hathway and  Crompton Greaves. Besides, Tulsian believes that if you are looking at an investment grade stock then, Cummins and Thermax can be very good for a 6 months horizon.

Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: The UB Group stocks are at top of mind because of the way they have moved. I wanted to ask you about UB Holdings and if you see more of an upside after the 17% move it's seen today?
A: Last week I had said that Kingfisher Airlines is languishing so much and there was a pause because Vijay Mallya was busy in the IPL. Now it seems that he has to initiate some measures to retire the debt of Kingfisher Airlines, which is to the extent of Rs 6,000 crore.
Mallya has two companies, United Spirits and United Breweries. Presume that he opts to direct divest the 37% stake in United Breweries, he can fetch around Rs 8000 crore. If he opts to divest entire 30% stake in United Spirit, he can fetch an amount of Rs 8000 crore. I am not taking that extreme situation because we have heard in the past that they are looking to divest maybe part of the stake, 15-20% in each company.
But I don’t think that this will really be sensible on part of the UB Group to shed part of the stake because United Breweries is the largest beer-maker, United Spirit is the largest hard liquor maker. Taking that into consideration, some action is likely to be initiated very soon, which will see huge value unlocking for both these stocks.
Coming specifically to the question of UB Holdings, the investment arm of the company, which is holding about 50% stake in Kingfisher Airlines and holding close to 33 crore shares in both these companies, will be seen as a huge beneficiary. That's the reason why the stock is up to the level of about Rs 70.
If you take an NAV to share price, it is ruling maybe about 10-11%, but the main concern for UB Holding has been the corporate guarantees of about Rs 9000 crore given by the company, largely for Kingfisher Airlines. That is taking a toll on the share valuation.
If these guarantee issues and all that would not have been there, probably United Breweries Holdings would have ruled, maybe at a price of about Rs 200-250 in line with a NAV to market price of about 35-40%, which has been the case with all other investment companies. But it is still ruling at a NAV of about 11%. That’s the main trigger for the stock to move up so much today. Q: NTPC made some statements with regards to reducing the capacity addition targets which they had till 2017 because of coal shortage and the stock is down around 2% on the back of that news. How would you approach that one?
A: I don't think any kind of hopes can really be derived from that capacity addition statement because we have been hearing that for the last couple of years from NTPC. They have given a very ambitious target of 50000 Megawatts by 2015-17.
Sometimes, you try to take shelter for some reason or the other that you have not been able to move on the expectations of your capacity addition and that has been the biggest concern for the company. They have remained stuck to the generation capacity of close to about 33000-35000 MW and that is a reason the stock has been languishing or lying low for the last 18-24 months.
I’ll continue to keep the same view and I don’t think that these statements have much relevance to take any kind of analysis on the stock from investment angle. Q: You think the euphoria on IGL will continue and you see more upside on that stock?
A: Probably looking at an EPS of 25-26 for FY13 justifies a PE multiple of 14. So, that translates into a share price of Rs 350. But if you see the hangover, which is still pending on whether PNGRB is preferring an appeal to the Supreme Court against the Delhi High Court order, that can make the stock to correct to about Rs 210-215.
No idea about the fresh Euphoria which we have been seeing in this gas based stock. Obviously, IGL is high beta stock in the space followed by Petronet LNG because you don’t see GSPL and Gujarat Gas moving in the same direction or in the same force and same ratio.
Probably, I will keep my positive view on IGL with a target of about Rs 265-270 because this looks to be an excellent trading stock. One can go for a stop loss of may be 1-1.5% and keep a target of 5-6% from a pure trading angle. Q: A surprise mover in today's trade is Speciality Restaurants, the new listing, which is up 7% odd and has gained around 40% since it has listed at it's issue price of around Rs 150. What are your thoughts on that?
A: This is an irony because whenever we see any issue getting through or finding it difficult to get through or finding very low subscription, they rule very high and probably the same thing is happening with Speciality Restaurants.
I won't say that this is purely a speculative game or maybe informed buying or operator game, which we loosely call it. Definitely, it deserves some kind of valuation and it has the promoter’s track record, growth and all that posted by the company.
But the kind of valuations we are giving to the stock now is pathetic. It is ruling at a PE multiple of Rs 35-40. Probably, I don't know whether this will really be going into the orbit of or on the lines of Jubilant FoodWorks kind of stocks, but I won't be comfortable with these kind of valuations being given to the stock. Q: A couple of these media stocks are quite active today, something like TV Today as well as Hathway Cable. Your view on a couple of these media stocks and what is possibly helping them up today?
A: Hathway Cable has been strong for last 1-1.5 months. Wenever the stock corrected to about Rs 160-165 level, we see renewed buying interest and post Kumar Mangalam Birla's stake acquisition in TV Today, it has been in the lime light on the hopes that further stake increase is likely and it will trigger the open offer. That is quite positive.
One could say that this is just the derating of TV Today but, for Hathway I think the stock has been moving in a range of Rs 160-165 to Rs 185-190.
Q: Your view with regards to Voltas, Crompton Greaves and Cummins India because we have the Credit Suisse report, which came out and they highlighted margin pressure, particularly for Crompton Greaves and Voltas going forward. How would you approach both these stocks as well as Cummins?
A: We have already seen margin pressure for the power distribution space. The Q4 results of Crompton have been very disappointing and you don’t have any hopes of the margins improving. It was at 5% because they need to ramp it up at least in the double digit, if not to 12-14%.
So concerns definitely remain on Crompton Greaves. The same view may not be taken for Voltas because the stock post Q4 numbers have been moving in a range. It was ruling at Rs 90, moved to Rs 110. Now the range of Rs 99-110 can be taken as a trading range, but over the next one month, from an investor's point of view, I am expecting the share to move to Rs 120-124.
Cummins continues to remain an investment grade stock. If somebody can keep a view of about 6 months, the stock is definitely very good because Cummins and Thermax both are ruling in the same space. In the present scenario, you have seen concerns on the margin of both the companies. But I am quite comfortable taking the investment call on both Cummins and Thermax over the 6 months horizon. Q: There was news on Reliance Communications. Today it saw good move of 4%. How would you approach it now?
A: The stock has been languishing for the last 1-1.5 months and I think this will be seen as a good trigger by the market for the stock to move up. One can definitely play on this and I am expecting this news to take the share price to about Rs 76-78 in this series. This looks a good positional trading call for this series.