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Last Updated : Apr 06, 2016 07:17 PM IST | Source: CNBC-TV18

Here‘s why Tulsian is upbeat on cement, sugar, tea stocks

SP Tulsian, sptulsian.com in an interview to CNBC-TV18 shared his views on why is not so upbeat on Ashoka Buildcon and why he is positive on India Cements, Kesoram Cement, Century Textile, some other cement stocks plus sugar and tea stocks.

SP Tulsian of sptulsian.com, in an interview to CNBC-TV18, shared his views on why he is not so upbeat on Ashoka Buildcon and why he is positive on India Cements, Kesoram Cement, Century Textile, some other cement stocks, plus sugar and tea stocks. He is also upbeat on Havells India.

Anuj: I first want a word on Ashoka Buildcon, which has been one of the stocks of the day. 20 percent lower circuit on that. It is not a small stock by any stretch of imagination. How would you approach it now?

A: I was never comfortable on this stock and if you see the pattern of the stock for the last three to four months - it was also on the lines of IRB Infrastructure. But if you go by these kinds of stocks where you have been hearing that kind of quid pro quo or maybe in collision with the politicians, they have all been getting the contracts awarded in their favour. I am not trying to pass out a judgement here that they are involved with the Chhagan Bhujbal, but these kind of concerns always remain and given a choice when you have so many stocks available in the market where you have the clear cut distance seen from all these kind of favours seen having given, I do not think that one should really take a call, even now, after seeing such a big correction.

Obviously, the company will say that they are not involved, that they do not have any kind of linkages with politicians or maybe with Chhagan Bhujbal. But once there is an income tax raid then the working or the affairs of the company gets derailed and will take time to come back again on track. And yes, any kind of political favour is always seen negative by the market.

Anuj: You have been quite bullish on cement but in midcap cement would India Cements be one of your top picks or would you have some other ideas?

A: You are right. After hearing the management of UltraTech Cement where they indicated a double-digit growth of cement – I would not have believed it if I had not heard the interview. So, coming on the potential of the companies which can enjoy the operating leverages is seen more in the companies those who are in the lower capacity, maybe anywhere between 2,00,000-10,00,000 tonne per annum capacity. And actually I am taking up, just focus on Andhra because of the construction of the Andhra and Telangana, the massive demand growth is seen there.

I am keeping my positive stance on India Cement, but in case of India cement also you have some of the issues involved or attached with the company, the way we have been seeing for Ashoka Buildcon. I am not saying that they are very severe or very grim, but you never know when they all can start coming on the surface. So, if you take a call, I am positive on Kesoram Cement and I am positive on Century Textile, which I have all been recommending maybe for last about 45 days or so. And in this 45 days, both the stocks have risen by 25 percent or maybe closer to 30 percent.

Even if you see Century Textile, today also, it is up by about Rs 35-40. So, continue to have a positive bias on these two stocks.

Apart from that, maybe the HeidelbergCement India which again I recommended about a week back are few of the cement stocks which I am quite bullish on.
In fact, I have been giving recommendation in the past also like NCL Industries, Panyam Cements and Mineral Inds, Kakatiya Cement, they are all from Andhra and if you come on the Gujarat part and all that, you have HeidelbergCement, Saurashtra Cement, Gujarat Sidhee Cement, those that have smaller capacity of anywhere between 2 and 5 lakhs and they have all been operating at a capacity utilisation of as low as 50 percent or maybe 45 percent.

So, yes, the operating leverages will be seen maximum playing in these stocks. Obviously for portfolio balancing within the sector also, you need to have a positive view on stocks like Ultratech Cement or maybe ACC, Ambuja Cement. But I will be courageous to have my exposure more into the stocks like Century Textiles, Kesoram and maybe few of the stocks which I have mentioned, even at the current as well.

Anuj: I might be repeating my question and almost everyday, these stocks are now surging, but is it now getting too exuberant, both on sugar and tea stocks.

A: As you have rightly said that everyday we are repeating this and everyday we have this fear, but I do not have that kind of fear really seeing on both these sectors for the simple reason that once we see the Q4 numbers, I cannot take an exact call on the tea stocks, what is the production and all that, but when I have worked out the production quantity held of the sugar companies more especially the UP based ones, where I have the data available of the crushing, recovery, and inventory held as on March, 31 and the kind of pricing pattern which we have been seeing now, they have been selling at the commodities, getting sold at Rs 35 per kg, the kind of production which we are going to see the short-fall, I do not think that one needs to be worried on the sugar stocks at least till December.

But just a caveat, because you see with all the sugar stocks, there must be at least 30-35 stocks in the sugar space with the name having word as sugar. So, people are trying to those, the left out feeling is making you to chase. I am not saying that Uttam Sugar or Dhampur Sugar are not good ones, but every stock has certain degree of what you call maybe the volume recovery corporate governance and all that. So, in that scenario, it is better that you bank on the quality ones, those who have really produced the sugars of over 30,00,000-35,00,000 back in this season with a recovery of 11 percent. I am referring more into the UP ones.

And if you really take a call on the season coming next year, because if we cannot take a call on the ensuing season also, it is difficult to take call for the next season. But as I said, that the pattern in India has changed where the production is lower than the consumption. I mean, 255 lakh tonnes is the consumption while the production even in this season where the people have given an estimate of 255 lakh or even Indian Sugar Mills Association (ISMA) has given 255 lakh, I doubt that it will exceed 245 lakh for season which will ending on September 30.

And come next season, I think it is likely to be less than 240 lakh tonnes. So, given this situation, one can safely remain invested in the quality sugar stocks. I am repeating the word, quality sugar stocks.

With regards to tea stocks, here you have only three or four stocks available. As we have discussed earlier also, Mcleod Russel, Harrisons Tea or Jayshree Tea and all three still have good upside to move on from here.

Sonia: What is your view after selling its stake in Sylvania, Havells has moved only in one direction and that is upwards. I know you were quite bullish on it a while back but do you think the run is done or do you still foresee more upsides?

A: I think this run is likely to continue but may be after seeing such a good run-up we have to wait for the results and we have to see the deployment of the cash which the company may be will be sitting on closer to about Rs 1,000 crore. At that time I had said that it has to be seen whether the company will be increasing their existing product portfolio by may be going aggressive on their marketing expenses or they look for or they are looking for any kind of domestic acquisition. So, it all depends on then but yes positive vibes continues to remain on the stock.

Anuj: A word on steel stocks, you have been positive on JSW Steel but how have you read the newsflow on Tata Steel and the big 5 percent surge today?

A: Unless until we know the broad contours of the monetisation, still we all have been talking of hiving off to a subsidiary or selling part of the stakes and all that. Unless until we reach on the concluded terms on which the monetisation of the Europe assets will happen because Netherlands will not get monetised and this is what I feel which has a capacity of closer to about 7 million tonne. So, that will not be a very satisfying move on part of the analyst – number one.

Number two – you have to see whether the Tata Steel UK on what terms it all happens. We have been hearing that probably the company may conclude the deal today or may be by tomorrow because the people have flown to London. I will not be taking a positive view. May be a cautious view and need to understand and wait for the broad contours of the deals to be read and see.

Anuj: You have been very bullish in the past on Century Textile, Rs 578 now, how would you approach it?

A: Purely, if you go by the cement story, that is just one part of it and you are right that I have been taking a positive call on the stock for multiple reasons, maybe divestment of paper division, restructuring of the cement division post MMRDA Bill. However, when I was seeing the data today, I think there is a volume of about 40 lakh shares has been seen on the stock exchanges on both BSE, NSE put together. If you go by the delivery pattern of this stock, I don’t think that any day we have seen a delivery buying of more than 3 lakh or 4 lakh on both the stock exchanges put together.

However, it will be really very interesting to see the data of the delivery today and what I have gathered, what I have the information that some corporate developments are happening at the management level and couple of HNIs learned to have bought the stock and I won’t be surprised to see the delivery of maybe about 7.5-8 lakh shares today. If the delivery happens to those levels and if it is right that couple of HNIs have bought today this stock, I think probably this will maybe keep showing the new upper limits from here on.

Anuj: Conspiracy theories aside, what do you think is going wrong in Ricoh India?

A: In fact, this is unfortunate. Since we have been talking as Varinder has touched upon the past movement, I do not want to name here. If you see, probably the stock has corrected by maybe about two third. At one time, the market capitalisation had touched to a level of about Rs 5,000 crore and the name which Varinder has given just now, I think of Manoj Kumar. He must have come repeatedly on the television on the print and electronic media reaffirming the potentials and the working of the company. So, sometimes, because of the multinational company (MNC) tag, maybe because of the high promoter stake and few of the HNI, it is very unfortunate, they have all kept giving calls and people get carried away with these kind of performance.

I do not know. I have not tracked the financial performance. Lately the moment you have these kind of skeletons start coming out of the closet, you start seeing that dip in the results also. I think they have not declared their results of September and December quarter also. And in June, suddenly the profits have fallen by 90 percent. So, these type of things are really SEBI must look into these things. In fact, these type of things, we have earlier seen with an MNC company, is in respect to AstraZeneca, for which SEBI is yet to deliver its verdict in relation to the delisting move. And it has happened in one or two other cases also. I am referring only in respect to the MNC.

So, one should not keep the eyes shut where the company has an MNC tag and everything is well and in order at those places. So, yes, this was an unfortunate incident and actually a few of the people, those who have taken a position are also need to be blamed for this.

Anuj: Two quarters back, it was a clean play. I remember we used to discuss that. It had a one way rally and then a one way decline. Now, that it has reclaimed most of the decline at Rs 88, what is your call on Dish TV?

A: I think both were extreme. One side upside and then the correction thereafter and sometimes it happens when you see the over-activity or maybe the entry and exit of some strong players when he enters in to the stock, they take a long position and probably that has happened. But yes, I have been keeping the positive view on all these broadcasts and in fact, that has been my view that Dish TV or maybe stocks like Hathway, I am in fact keeping a positive call on all. And from here on, specifically on Dish TV, the stock looks good which is capable, but one should not expect a sharp upmove coming in just in the near-term, so maybe wait for the dip to come, Rs 85-86 could be a level and look to trade in the range of about Rs 85-86 to about Rs 93-94.

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First Published on Apr 6, 2016 07:17 pm
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