L&T, Sintex & IVRCL are good buys: Tulsian

In his analysis of the day's trading on CNBC-TV18, SP Tulsian of sptulsian.com, expresses disappointment on the performance of almost all stocks. The only stocks that have provided hope are L&T, Sintex and IVRCL. 

He is specifically negative on Bombay Dyeing on news that the a group company, Bombay Realty, is to sell parcels of real estate. He is gloomy about the infrastructure sector with Adani suffering due to fuel costs and Orchid's 40% erosion of  bottomline. Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: What are you hearing on this entire futures and options trade coming to a halt?
A. I don't think that there is anything further or if there has been a revival of the trade at the exchange. Q: Any thoughts on the results posted by L&T and JSW Steel?
A: I think the L&T results are quite satisfactory. I don't think there should be any complaints on that, inspite of maybe some increase in the bottom-line largely due to the reduction in the tax rate and partly on income or an exceptional item.
But JSW Steel is a big disappointment. This may have been expected, but it is significant due to a drop in the bottom-line. Q: How would you approach L&T after reading the fine print and the results ?
A: I think it is investment-worthy at the current level. The company has been a little cautious on maintenance of the EBITDA margins limiting it to a drop of about 50 bps. The EBITDA margin of 13.5% as indicated by the management looks a little cautious.
But I don't think there is anything to complain with the growth projections of about 16-18%. So at the current levels, the stock is good for investment. Generally, it has been observed that whenever market sentiment improves, there is a surge in the share price of L&T by about 6-10% in a very short time.
I think the kind of results we have seen the downside is very limited with the stock having already corrected to a great extent. There may have been a downside of Rs 50, but you will get an upside opportunity of close to about Rs 100-150 on the upside in the next month or so. Q: IVRCL has announced a topline of Rs 1,596 crore and a PAT of Rs 5 crore. Do you think it will fall further?
A: I don't think that the company will really fall further. We have not yet closed the interest of Essel Group in the company. I agree that the results have been very pathetic. If you analyse the top-line of about Rs 7,000 crore, it's really disturbing and bad.
But I don't think that Essel's interest has ended, it has just taken a pause.
With the exit of tired short-term investors, liquidation of trading positions which will happen maybe next week or so and bad results in this quarter, could bring back the share to a level of about Rs 40-42 where it reaches its fair value. Q: How would you react to the sharp slide in Orchid?
A: Again, it is a very big disappointment because the management had given the guidance for growth in the topline and bottom line.
I don't think that the Rs 14.5-crore PAT is exceptional because last year in Q4, the company posted exceptional losses on account of forex and other factors.
_PAGEBREAK_ Q: What about Bombay Dyeing? It has reacted quite violently to claims that a certain percentage of Bombay Realty was to be shared?
A: It's quite negative a for the stock. If you see, the total valuation of the stock is being derived from the real estate held - 45 acres in Lower Parel and about 48 acres in Naigaon, Wadala and one-third of that is 16 acres.
So in fact, we are talking of 65,000 sqmts which is not in respect to both pieces of the land they own.
If the same is applies for their Lower Parel property also, that will knock off a further 60,000 sqmts and that’s a very big chunk.
Overall, we are talking of about maybe 1.5 million sqft of the saleable area going away from the company and this is going to be seen very negative.
The profitability for the company comes totally from real estate. The DMT and the textile division have been making losses for last eight quarters or so. So definitely, it is a negative for the stock. I won’t be surprised to see it settling at around Rs 350 or so. Q: Of the disappointments today between IVRCL, Orchid and Adani Power, which one would you be most disappointed with where you would rule out any near-term pullback?
A: I am disappointed with all three, except for maybe IVRCL. As I said earlier that the company’s actions are in a way providing some hope.
Regarding Orchid Chemical, honestly I will not be relying on the guidance on growth of about 15-20%.
For FY12, we heard the same kind of guidance by the management and there was an erosion of 40% in the bottom-line based on effective EPS.
Thirdly, Adani Power suffers from the pain of fuel costs. I am not going by the mark-to-market gains on the derivatives in this quarter, but the higher tax burden on account of the deferred tax may have also had its effect.The fuel costs have further aggravated on a sequential basis.
I am disappointed on all three, but if you need to take a call, probably IVRCL could be the only pick on hopes of corporate initiative. Investors can maybe look at a lower level of Rs 80-82. Q: On the disappointing infrastructure results. Apart from the stocks previously discussed, a slew of other companies, such as GVK and Sintex, reported bad results. Is there anything that you would want to buy at these distressed valuations or would you leave the infrastructure alone for at least a couple of quarters till there is more clarity on earnings?
A: I am not that disappointed with the results of Sintex Industries.
If I need to pick and choose amongst GVK, GMR, IVRCL and the rest, probably Sintex Industries interests me at the current levels.
I don’t think that one can really take a trading call, but on a fundamental basis, even with a short-time horizon of about couple of months, offers reasonably good returns of 10-15%.
Though it has been taking a beating on long liquidations, the results are not as bad as they seem to be.