Moneycontrol
Last Updated : Feb 08, 2013 01:49 AM IST | Source: CNBC-TV18

Mkt break down unlikely; no positive cues either: Tulsian

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com gives his views on the market's performance. The Nifty today ended trade at 5938 down 20 points.


In an interview to CNBC-TV18, SP Tulsian of sptulsian.com gives his views on the market's performance. The Nifty today ended trade at 5938 down 20 points.  


Tulsian says that the Central Statistical Office's (CSO) low GDP estimates could be one of the reasons for the market's flat performance. However, it is the midcaps' dull performance that is pulling the market down. "Overall since start of this series, things have not caught on. However, on the positive side, it has just been languishing sideway since then," he adds.


Also read: GDP at 5%: Services slowdown to be blamed, say experts

Below is the edited transcript of Tulsian's interview to CNBC-TV18.


Q: What are you picking up on Strides Arcolabs? There are lots of rumours doing the rounds, but why do you think the stock is down 15 percent today?


A: I have absolutely no idea. The stock has been dancing to the tunes of the rumours on the sale of their one division for about USD 2 billion to Pfizer. We have been hearing this for the last one month or so. However, I don’t know the reason for the sudden fall that came at about 12 pm. We saw the stock correcting by about maybe Rs 150 or so. Since it has been holding at about Rs 900, it could be a case of massive selling by one of the investors who may be privy to the information. However, no denial with respect to the stake sale of one division has come in. So, it is difficult to take a call.


Q: What have you made of the surprise big up move of 10 percent on A2Z?


A: It is very strange and it is difficult to take that call also. If you see their business model and the financial performance, I don’t think that, that has been convincing at all. There’s no reasoning to this sudden up move. There maybe some kind of buying that must have come at the lower levels, because the stock is now ruling at 10 percent of its IPO price and that too after three years or so. The stock is virtually at about 5 percent if you add the interest costs. So, maybe some small buying must have come which led to this kind of surge.


Q: Any reason why the market has fallen 0.5 percent today? Is it because of the Central Statistical Office (CSO) estimates that are forecasting gross domestic product (GDP) at close to lowest in a decade? Or do you think there is something else?


A: That could be one of the reasons. However, I don't think the market really should be perturbed with that because ultimately, we all know what has been the situation. One could take a call on the expected GDP for FY13. So, I don’t think that, that should really be the cause.


One may say that, that may have contributed to the negative bias of this market. Since the start of this new series the market has not been breaking a lot. I am not talking of the metal and the capital goods sector which have been really very weak. If you knock off the real estate which have also been weak today, but have otherwise been seeing some improvement coming in, it is not like the market is breaking down.


Even if one takes the technical call, the technical analysts have been taking the support at even 50-60 points down. So, even the negative view is not very reassuring that the market will break by about 150-200 points. One can say that the things, infact on the midcap front are really very dull and bad. Overall since start of this series the things have not caught on. On the positive side, it has just been languishing sideway since then.


Q: What have you made of the subscription on National Thermal Power Corporation (NTPC) so far? It has come in at around a ballpark range of about Rs 145 or so while many analysts on the streets were expecting it to come at a little bit of a higher end. How would you read into what has come out so far?


A: I was not expecting that to come in at the higher end, that is number one. Secondly, ultimately one has to see the quality of the investors which we will get to know only after couple of days or so.


This kind of response which we have seen in the issue so far, maybe to the extent of about 60-65 percent to the issue, largely must have come from the public sector undertakings (PSUs), LIC and maybe the domestic insurance companies. So, that is keeping the interest alive in the offer-for-sale (OFS). I was expecting them to come and to rescue this issue. I had taken a call in the morning also that I am not expecting 20-25 percent of the total OFS size of 78 crore shares coming in from foreign institutional investors (FIIs).


That means there will be very dull response from FIIs at the current rate. However, it has been gradually inching up, which again indicates the structured move being done by the government with the support of LIC and the insurance companies.


Q: Ambuja Cement is down close to about 2.5 percent. What are you expecting from the numbers from both Ambuja and ACC? Do you expect Ambuja to disappoint the street?


A: I do not expect Ambuja to disappoint the street. Having seen the analysts’ estimates, I am quite upbeat and optimistic on the estimations. Maybe the EBITDA of Rs 550 crore for Ambuja and maybe an EBITDA of Rs 500 crore for ACC


If one goes by the results declared by all other cement companies till now, they have practically been on lines of September quarter. Generally, the December quarter has always been robust for the cement companies, but because this time the rising cost of production has eaten away their pricing power or their margins, I do not think they will declare disappointing Q2 numbers because for Ambuja and ACC, it is Q4 numbers. So, I do not think that they will be disappointing on the September quarter numbers. September quarter numbers have been the worst among whole of the calendar year 2012. So, I am expecting better numbers broadly on the lines of the September quarter number that they have posted.


ACC may disappoint, because we have seen a fall of about 6 percent bps in the September quarter also. So, I am not too confident about that, but atleast in case of Ambuja Cements, I expect they should be able to post an EBITDA of Rs 550 crore with profit after tax (PAT) of close to Rs 325 crore while in case of ACC I am estimating EBITDA of Rs 500 crore with PAT of about Rs 260 crore or so.


Q: Manappuram General Finance has lost close to about 10 percent. How would you approach it now?


A: They are very bad numbers. If you see their topline, it has seen a sequential drop in the topline. That itself is a great cause of concern. So, while Q1 cheered the market, Q2 disappointed, Q3 vastly disappointed and if the same trend gets repeated for Q4, then people will definitely be very cautious in the stock. However, in the process because the stock was quite over owned by the market, people have been very bullish on the expectations of the guidelines and on the usage ratio or the lending ratio increased by the company. So, probably the stock will keep correcting and settle at about Rs 35-36 in next week or so.


Q: You watch VIP Industries very closely. Compared to last quarter, atleast they have reported some EBITDA, but this looks like a really disappointing set of numbers. How would you approach the stock after the 4 percent cut?


A: I was never convinced with these kinds of valuations. About 12-18 months back, it was very richly valued. If you go by the management which has a very low market perception and if you go by the business model, 90 percent of its imported contents, they import from China and they have such a big competition threat.


To push the product, you have to offer discounts to the dealer, discounts on the product to the consumers and you have a lot of competition from the imported stuff. So, taking all this into consideration, one cannot really realise the consistency of the financial performance of this company. I have never had confidence and faith in the financial performance of this company considering its business model, where the weakening rupee can eat away your entire profits. About 85-90 percent is the imported content. So, taking all this into consideration, I have always been very worried and have remained away from the stock. So, I continue my negative view only. Whenever we see any kind of up move, that should be used as an exit opportunity.


Q: What is your view on ACC and the numbers it reported just now?

A: They are good numbers. The company has reported PAT at Rs 251 crore. Some margin pressures are definitely seen. I am not happy with the EBITDA that they have posted. They have a consolidated bottomline closer to Rs 260 crore estimate and Rs 239 crore has come on the standalone basis. So, the kind of positive bias we have been seeing on the stock can probably make the stock move to about Rs 1400 or more in this series.

First Published on Feb 7, 2013 04:11 pm
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