Short or long? Here are 6 stock picks from SP‎ Tulsian

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com gets stock specific in a very volatile market. He analyses select stocks like JP Power Ventures, JP Infra, Jain Irrigation, VIP Industries, Exide and Voltas. He also looks at the IPO space and the offering there - Speciality Restaurants.

Below is an edited transcript of his interview. Watch the accompanying video for more. Q: Earnings numbers from the JP Group - JP Power Ventures and JP Infra are expected today. What do you expect to see from there?
A: For JP Power, I don’t think anything exciting will be seen from that company. If you see the hydro and thermal base both the sectors are not going to perform well. On JP infra, I think the contribution from engineering, construction and cement will really be very interesting and I don’t see any reason for disappointment.
In case of JP Associates, you have a lot of combinations of subsidiaries like JP Infra and many other ventures. Apart from that, many adjustments have been done by the companies for the last four quarters. If you see, sometimes the results become complicated. So one needs to take the consolidated results of JP Associates, but I am expecting at least improvement from that company for Q4. Q: What about something like a Jain Irrigation? Do you think value has emerged there?
A: Yes. Even there I am convinced and satisfied with the performance of the company. If you see in Q4, the trend has been on the margin front. They have started showing some improvement. A big concern for the company has been that the debt has been piling up because of the huge blockage of the amount in their working capital. Even there we have seen a minor reduction in the debt. So probably that could be a start of the positive days ahead for the company.
The kind of weakness we have seen in the share price, I don’t think it justifies a further downward trend on this. Going forward for the next six months, the time for the company is going to remain quite good because of the approaching monsoon and all. So I will be putting Jain Irrigations in the same category as Sintex Industries. Q: How do you approach a stock like VIP? The results were pretty bad this time around. But do you think the bad news has been priced in, in this fall?
A: No, I think the worst is yet to come. If you ask me one stock to spot which will be the worst affected because of the rupee weakness which we have been seeing, it will be VIP Industries because of the amount of their import content and the competition from the unorganized sector. I don’t think these kinds of valuations are justified. We sometimes see the trading momentum coming back into the stock, because this is a highly fancied stock along with maybe Delta Corp but I think on fundamental the weakness is yet to come. Q: Exide is another midcap name which has been quite volatile. Do you think it is close to a bottom?
A: Yes. I am quite positive on the stock and though it has corrected to about Rs 114-115, I think Rs 120 looks to be a very good support in spite of the stock ruling virtually at the current rate. If you see the kind of performance the company has posted, again I am referring sequentially, definitely the performance has shown improvement. They have shown the margins improving to about 14.7.
The management has given a guidance of 16-18% for FY13. Led which is the major raw material for the company constitutes about 65% cost of the raw material, because that is import parity price. If rupee weakens then probably that can take a hit. But they have been very smart in passing on the cost increase and the kind of guidance they have given looks reasonable considering they have 60% auto share, 40% industrial battery segment. So overall, I am very positive on the stock from hereon and it seems that Rs 120 looks to be its strong support. Q: What about something like a Voltas? That’s also corrected and come close to Rs 100. Would you buy it here?
A: I don’t think in Voltas one can have an investment conviction. If you see the kind of volatility which we have been seeing giving some advantage or scope to the traders, I don’t think that even I as an investor have any conviction. In case of Sintex and Jain Irrigation probably I may develop an investment conviction but I won’t be having a similar conviction in case of Voltas. Tata Global and Voltas, these two stocks, after sometime seeing a good rise again they swiftly correct. So maybe at Rs 100 investors can look into it, as is the case with Tata Global. They can look below Rs 95, but won’t be taking it as a secular investment stock at this stage. Q: Two IPOs have had to withdraw but Speciality Restaurants is open right now. Any thoughts on that?
A: If you go by their background, their execution capability, margin expansion, everything is in place. But everything boils down to valuation. If you go on the expanded equity, I am not calculating that for FY12, but if you calculate that for FY13, I think the share is issued at a PE multiple of 24. Even if I take an issue price eventually getting discovered at Rs 150, I don’t think these kinds of valuations are really justified with a market cap of close to about Rs 740-750 crore. Things are definitely quite staged. I would say they are brave enough in launching the issue at such a hefty valuation.