Tulsian's take on SBI, Maruti, infra & sugar stocks

SP Tulsian of sptulsian.com in an interview to CNBC-TV18 shares his take on infrastructure and sugar sectors and in which direction he sees stocks of majors like Maruti Suzuki, State Bank of india and Tata Motors headed.   Below is the verbatim transcript of SP Tulsian's interview with Anuj Singhal and Sonia Shenoy on CNBC-TV18.Anuj: A word on all these infra stocks which have rallied today. Of course, part of it is because of the power news as well, but stocks like Alok Industries, Lanco Infratech, GVK Power, JP Power, Nagarjuna Oil all penny stocks all companies with huge debt. How would you see rally in some of these stocks?A: It is combination of all because first if you really see the strategic debt restructuring (SDR) where the banks have exercised their rights and in fact, now they are finding it very difficult to take possession and run the company. Case in point is Alok Textile, but I don’t think that this is a right move because if the same promoters are running the company or same promoters who are running the company and you have seen the company having reached to such a critical stage, what is the point of allowing the same promoters to continue because banks are not capable. They should not have incorporated this kind of provisions or the SDR should not have exercised or should have given thoughts much before that number one.Number two, if you take the case in point of Lanco Infra again we see that they are trying to monetise 8,000 megawatt power projects and that is seen such a big move. Yes if you are seeing a drastic reduction in the debt likely to happen with this kind of moves, where 60-70 percent of the debt of the company can get reduced that is definitely seen positive and lastly if you see the retail traders and all people, you have a very big class of these type of investors who feel that what we are going to lose at buying these shares at Rs 5-7 and because on the relative basis as compare to other stocks they can rise 20 percent maybe for next 2 or 3 days or maybe in one month they can almost double because that is the premise they take before taking a call on these stocks whether they succeed or they don’t that’s a different case, but they always have the liking for these penny stocks kind of things. You have combination of all the reason and whenever you see one or two stocks start moving up whether it Lanco Infra or maybe GMR or maybe GVK or Alok you see other stocks also joining the bandwagon and because you have at least 30-50 stocks available of the similar type and in the similar category.Anuj: The other stock that I remember discussing with you was Asian Paints and you had said at Rs 1,020-1,030 clearly it run up a bit too far, but if this corrects more at what point would you advise fresh entry since you remain constructively bullish on the company.A: The positive bias continues to remain for the long term investor, but here the reason for giving a profit booking at Rs 1,030 was that stock has run up quite a lot and if you see the situation going ahead Q1 results may not really cheer the markets, so instead of taking a price call rather I will take a time call, I won’t mind waiting till the Q1 numbers are out and maybe one week thereafter, because you may see the disappointment coming in from Q1 numbers. I am not saying that the numbers will be bad, but the numbers will be flat and market is habitual of seeing the growth every quarter, they forget that Q1 is always or generally the dull for the paint companies. Maybe till end of July or maybe middle of August, I will take a time call, but if you need to ask me for a price I won’t be hesitate in taking a relook at the stock at the level of Rs 950-960.Anuj: I am repeating this question almost on a weekly basis, but we have hardly one or two days of correction of 3 or 4 percent and then the sugar stocks are back to new highs. Today also we have seen that especially, in the smaller stocks now the likes of Ugar Sugar and Uttam Sugar rallying, so (a) do you stay invested and (b) I want to ask you why is Bajaj Hindusthan not rallying as much as some of the other stocks have rallied especially, in the UP based sugar stocks?A: Let me tell you I am also repeating the same question for maybe last 4 or 5 months and in fact, I have replied that saying that Renuka and Bajaj in fact, two are the victims of the high interest if you just go first on the Bajaj Hindustan in spite of company having produced over 1 crore bags of sugar which is highest by any company in India in this sugar season they cannot, because if you have that kind of interest burden with the company and they have also diversified into power generation kind of things, so people are not very much interested in that number one.Number two, if you take a call on any other sugar stocks except UP based or maybe Karnataka based also because Ugar Sugar is an exception because they have a very recovery of 13 percent. They are carrying very good inventory at Rs 26 per kg – that has it fundamental and because you don’t have any other pure Karnataka based sugar companies available. You have Renuka some of the mills in Karnataka, you have EID Parry some of the mills in Karnataka, but Ugar is a pure sugar play, so coming back on your question if you go by the UP based sugar mill the kind of inventory which, in fact, that was my theme which I have said about three months back if you recall that FY17 will be the record profit to be posted by all these UP based sugar mill and Q4 because at that time Q4 results were not out will be 2-3 times, but of Q3. But all the companies have shown 4-8 times of the Q3 numbers having posted.Now come on the situation going ahead. I don’t think that season which will start on October 1, 2016 I am referring after 4 months the season which will start countries going to see a production of more than 210 lakh tonne or maybe 21 million tonne. Yesterday, in fact, if you see or maybe the price in the global market has reached USD 530 that translates to Rs 35.50.Today in Bihar the mills have started selling at Rs 35-35.50 ex-mill. In fact, if you see the inventory carried by these mills as of March 31 is at Rs 28-29, I am referring for the UP based sugar mill – you have straight Rs 6 per kg as inventory gain, which can give you a gain of Rs 200-225 crore to Triveni, Rs 400 crore to Balrampur Chini kind of stocks and I won’t be surprised to see these prices going up to as high as maybe Rs 38-39 ex-mill maybe in the next couple of months considering the global situation. I continue to reiterate that sugar is going to continue to have this kind of performance, because even the next season is going to be bad. Let’s not forget that this monsoon will not see higher production of sugarcane that will only be available after 18 months, so I don’t know I have been hearing many of the analysts or experts on the channel who have been saying that political commodity and all sort of things, no harm in booking profits, but I am giving the picture on that ground that what is all happening; international prices can move to USD 575 I won’t be surprised to see that happening in next couple of months due to the global shortage, so I have presented you the picture of India as well as the global picture, as well as the situation expected in India for the next season as well and considering all those things I keep my positive bias intact on the sugar stocks.Anuj: A word of Maruti at Rs 4,100 is this still an avoid for you as it was above Rs 4,000 or do you think it can be bought?A: Two stocks if you see Tata Motors and Maruti both if I take a April 1 as the base both have risen by about 20-22 percent if I am not mistaken from Rs 3,400 to Rs 4,200 for Maruti and similar is the rise for Tata Motors, but the kind of positive perception which we have seen building up for Tata Motors post Q3 numbers and so much what you call positive recommendations coming in on Tata Motors, while the Maruti has quietly has increased by similar percentage of 22-23 percent in spite of yen remaining quite strong at around 108 to 110, so yes I was giving a buy call at Rs 3,400 and when the stock reached at Rs 4,100-4,200 in the last couple of days or maybe for the last one week or rather the post Q4 having posted by Tata Motors, I have been in fact giving profit booking call on both the stocks.There is no harm in booking the profits now because you may get to see the Maruti again correcting to a level of Rs 3,950-4,000, where the entry can be made for the short term investors those who have exited earlier. Similar is the case for Tata Motors, I won’t be surprised to see the price again at around Rs 440, because if you see the wholesale consolidated global sales of Tata Motors at about 80,000, in fact, that’s not very comforting or that has really displeased the market. I think overall both these stocks are seen good from a longer term point of view, but yes maybe the correction of 5 percent from here on is not ruled out for Tata Motors as well as Maruti.Anuj: What about State Bank of India. At what point does it become a buy again because the rally has been relentless and to be fair the numbers were also quite good and the market has rewarded that?A: When the numbers came in on 27 May and the series has started at that time the share was ruling at Rs 185 and I say that stock can move to a level of Rs 205-210 and at that point of time, in fact, I gave a buy call on all PSU banking expecting 8-10 percent gains to be seen in this series, but that gain we have already seen in just couple of weeks and now they are all seeing profit booking, but I don’t take this as a bearish tone returning back to all the PSU bank stocks including State Bank. Maybe the correction will happen for next 3 or 4 days make them correct to by about maybe about 4-5 percentage from here on and again the expiry maybe till for the whole of the series the stance on the PSU bank continues to remain positive, so maybe again review the call, take a call at that point of time again maybe at again Rs 196-197 could make a good entry point for State Bank of India.