Tulsian positive on CMC, OnMobile; Infy good buy at Rs 2100

Infosys has already disappointed with its performance and SP Tulsian of sptulsian.com feels that after the results of another IT major like TCS is declared, investor sentiment about IT stocks would be clear.

Talking about Infosys, Tulsian tells CNBC-TV18, "I am expecting the price to fall to about Rs 2,150. If somebody wants to plunge into the stock he should really wait for further fall of about Rs 100 in Infosys. For investors, the right price for entry could be anywhere around Rs 2,100-2,150." CMC has posted very good earnings for the first quarter and the stock has seen a significant rally, said Tulsian. He further added that if you want to make a quick buck, United Breweries Holding at the current level is a good buy.
Tulsian is also optimistic about OnMobile Global and holds a price target of Rs 42. According to him, the stock will see significant upside in the near-term. Below is the edited transcript of the interview on CNBC-TV18.   Q: What's your sense about Infosys now? Is Rs 2,250-2,200 an attractive level for an investor to accumulate for the medium-term? What's the word on this trade?
A: No, in the last couple of months, people have started taking a positive call that FY13 is likely to be very good. We have seen short-term buying or maybe investment buying happening in the stock between Rs 2,400-2,500. Probably the entire quantity doesn't come for selling, but once the results of maybe TCS is out and if that is better, we will again see a good shift from Infy to TCS.
This would be due to the kind of consistency and confidence which we have been witnessing in TCS for last eight or nine quarters. If it gets repeated today also, it will really be reassuring and the shift is likely to continue from Infosys to TCS. In that situation, maybe one cannot say that the pessimism has got factored into the price.
I am expecting the price to fall to about Rs 2,150. If somebody wants to plunge into the stock he should really wait for further fall of about Rs 100 in Infosys. For traders it is a different ballgame. They need to watch the trend and take a call accordingly. But for investors, the right price for entry could be anywhere around Rs 2,100-2,150. Q: What about something like CMC that has reported a great set numbers this time, would you expect more of an upside there?
A: Yes excellent numbers. Yesterday we saw 35% growth, that too sequential with an EPS of close to Rs 19. This is a 51% subsidiary of Tata Consultancy Services (TCS). If you just extrapolate the trend, the kind of sequential growth we all expect from all the IT companies and if the same trend is applied to this company, they can easily post an EPS of Rs 84-85.
It is wrong to assume that these smaller companies will have a lower PE multiple because one section of the market argues that these smaller companies will be having a lower PE multiple. We are seeing CMC rule at PE multiple of close to about 12. But, I am keeping my positive stance on this stock.
I was not expecting the stock to really breach Rs 1000 digit mark today. Probably, I thought it would be moving to about Rs 925-930 and the call of Rs 1200 was taken on the stock with a time horizon of maybe next 3-4 months. But, the market seems to have liked it and have gone beyond expectations. Q: What have you made of the comments from the oil ministry sources that the diesel price hike is coming post the presidential elections and are you hopeful now? If yes, how would you play some of these oil marketing companies or even the oil and gas plays?
A: The statement which we heard this morning that the downgrade by S&P was averted by the Prime Minister. So I won’t give much credence to the statements issued by the ministry because yesterday we saw that Cabinet Committee on Economic Affairs (CCEA) is likely to consider 10% stake sale in SAIL and this morning we saw that the meeting is getting deferred.
No doubt, sentimentally it gives some confidence. But it has been seen as a foregone conclusion that even if the government does not move after the President election, there will be a collapse of the economy. I think the gloom and doom will start building upon the economy.
Calculation will be made regarding the kind of increase it is going to see, whether it will be a token increase of Rs 2-3 per litre or it will be a significant one of about Rs 5 per litre. Whether the rollback will be happening, who all will be consenting it and the kind of equation is made at Delhi will just be a beginning of the initiation of reforms.
If diesel price increased by about Rs 5 per litre with a token increase in LPG at about Rs 50 per cylinder, I think that will be seen as quite positive. I am not expecting anything to happen in kerosene. Then this push or the initiation of reforms has to get carried away or carried on by the government in the form of other initiatives which are pending for quite sometime.
This will be a good beginning which is expected to happen maybe on Monday, once the elections are over by July 22. The result will be out on July 23 and one can expect something that will get reflected into the July series, which is expiring maybe on July 27 or July 28.
_PAGEBREAK_ Q: From this entire bracket now for a trading idea which stock would you pick up, either Mangalore Chemicals or even something like UB Holdings?
A: I don't think that you have much upside in Mangalore Chemical because the stake sell is bound to happen. The expectation is that it is likely to happen maybe at about Rs 64-65 per share and because of the low promoter stake of 30%, the open offer for 26% is going to see the lower acceptance ratio even if the deal happens at Rs 64. The upside can be capped at about Rs 53-54.
Coming specifically on UB Holdings which is the flagship investment arm of the group, they are holding Rs 3 crore worth shares of United Breweries and Rs 2.40 crore worth shares of United Spirits. The kind of run up which we have seen in the prices of both these stocks, United Breweries and United Spirits has made the share of United Breweries Holdings to rule at a NAV of about 10-11%.
I am not including the value of 20 crore shares which they are holding in Kingfisher. Now this seems to be a foregone conclusion that ultimately the debt has to be paid by the UB Group to the bankers. There is no likelihood of any reschedulement or restructuring process on which I had been taking a call for the last two-three months.
That can make the United Breweries Holdings to move very quickly, maybe to about Rs 120 in next one month or so. The third stock where this stake sell can happen will be either in United Breweries or in United Spirits. One has to really take a call because if you see United Breweries, a share with a face value of Re 1, is ruling very high at about Rs 530. Similarly, United Spirits with a Rs 10 face value is ruling at about Rs 750-755.
You have upside on both the stocks provided you can take a call that the stake sell is likely to happen. The first choice of making quick bucks will be in the United Breweries Holding, even at the current level. Q: OnMobile Global is again up 5% odd, is the overhang behind it and what is your sense about how the stock will move from here on?
A: I think from hereon the value buying is coming back into the stock since it touched the level of Rs 30. Since then, I have given my positive call with a price target of Rs 42 in the near-term. Maybe this rally can continue for another 4-5%. But beyond Rs 42, I won't be advising it either to short-term traders or investors. But in the near-term, upside is seen in the stock. Q: Any thoughts on Karnataka Bank which has moved up quite a bit today?
A: No, after a lull for quite sometime, maybe four to six months, the stock has been witnessing renewed buying interest. The stock definitely looks quite undervalued when you compare it with the other private sector banking stocks. Probably this momentum can make the stock move to about Rs 110-112 where the pause should come. We need to closely watch the Q1 results also and it is likely to be good.
I don't know whether the extreme positive surprise can really come in from the Q1 results which looks like the trigger for buying seen in the stock. But yes, positive view till Rs 110. Q: How about something like Sintex Industries that reports its numbers tomorrow, what are you expecting from that one?
A: I am expecting positive news from them because of the kind of erosion we have seen in the share price due to the dull performance and maybe because of the FCCB redemption. But, if you go by their cash positions, they have Rs 750 crore FCCB repayment liability. Although, it is not seen as a big dampener but, improvement in Q1 numbers are definitely likely for this quarter.
 
Q: Your thoughts on the sugar space?
A: We have seen the huge run up in the global market and because Brazil is not harvesting due to rain, it is estimated that probably India's production will also be quite less for this season. It will start in October and we won’t be surprised to see India turning out to be a net importer in the crushing season '13-14.
All these things are going quite positive but, it may not be that positive for the UP based sugar mills because the mills in Tamil Nadu and maybe Shree Renuka Sugar which has presence in Brazil, is making good exports. It can be seen as the beneficiary from hereon. Q: SKS Microfinance has already had a very big run all the way to Rs 95 levels, do you see more upside?
A: Yes, it may not be for traders because at the time when the call was given, it was estimated that it would pause at Rs 100. But if you take it from a short-term investment point of view, I think in the next couple of months the stock has potential of moving to Rs 120 or so.