Not long on rate sensitives ahead of RBI policy: Tulsian

In an interview to CNBC-TV18 SP Tulsian, sptulsian.com shared his outlook on stocks like Adani Power, JSW Steel. 

Prima facie looking at JSW Steel Q3 numbers, he says they look slight negative though one has to look at Q3 EBITDA to see whether the company has performed well or not. Whereas Adani Power’s numbers are really bad, he added. He expects Crompton Greaves numbers also to be disappointing and won’t be a buyer in Jet Airways beyond Rs 640. With regards to rate sensitives he said, “I won’t be long on either real estate or capital goods or banking stocks etc ahead of RBI meet” Below is the edited transcript of his interview on CNBC-TV18 Q: What have you made of Adani Power’s results and particularly with respect to the Adani Group, the divestment of Abbot Cables (not sure) to the Adani family? A: The results of Adani Power are bad. The net loss on a sequential basis or maybe the whole financial performance on a sequential basis, because it was Q3 net loss Rs 620 crore against Q2 net loss of Rs 273 crore, there is a differential of Rs 350 crore. Adani Power since they have completed their new projects, the interest depreciation is widened as is said because of the interest Rs 300 crore plus, because of depreciation Rs 100 crore plus and if you see the forex loss adjustment Rs 200 crore plus. So, net loss of Rs 620 crore definitely looks very bad.  Hence, on all parameters if I just try to shrink it or make it narrow, operating loss of Rs 61 crore against operating profit of Rs 61 crore in Q2, definitely the numbers look quite bad. I don’t know when they really will be able to control the feedstock cost. Although that kind of control we have seen in case of JSW Energy. Last week when we saw the numbers, hopes had risen that probably Tata Power and Adani Power would also be able to control their cost especially since Adani Power has a good control on the sourcing of the coal because they are the largest coal trading company in India and Adani Enterprise, the holding company of the Adani Power.  Coming to the stake sale in their Australian Port, I haven’t had a close look at that on what will be the financial implications etc. It has to be studied in detail before commenting on it.. Q: Prima facie just based on the numbers that have come out, how does KSW Steel numbers compare with what you were expecting and how would you approach the stock now? A: It looks little negative> If you look at Q2 consolidated numbers, they had an EBITDA of Rs 1500 crore plus on a topline of close to Rs 9500 crore. So, I don’t know whether these are the standalone numbers or these are the consolidated numbers but I will take them as quite negative.  Because even if you take the higher production, even at YoY I don’t think that there is any kind of concerns on the volume growth. However, since there has been price contraction and we have discussed that in the past that there has been very poor offtake, so maybe realisations must have fallen quite a lot. One has to see that what the EBITDA really is.  As I said that Rs 1500 crore plus was the EBITDA for Q2, so the EBITDA will give the correct picture that whether the company has performed well or not. Q: Wearing your trader’s hat would you buy any of these rate sensitive’s ahead of the policy tomorrow, would be bullish on anything either from the banking or from the real estate space? A: It is better that we remain away because the risk reward is more tilted towards the risk. So, it is better that we remain away because lot of confusion is there in respect to the outcome of the RBI meet. So, I won’t be long on either real estate or capital goods or banking stocks etc ahead of RBI meet. Q: MCX-SX will be going live on February 11 and the stock is reacting positively with a gain of about 3 percent, a quick word on MCX on the back of this news. A: We have been hearing this news and earlier this date was scheduled in the middle of January so positive for MCX as well as positive for Financial Technology both. Q: The noise level surrounding Jet Airways as well as the Etihad deal gets louder. At Rs 600 do you think the risk reward is favourable for someone to go ahead and look at Jet Airways? A: I had explained earlier also that the sources have been saying that probably 24 percent stake will be acquired by Etihad for about USD 330 million that translates about Rs 1800 crore plus for 2.73 crore shares. So, whatever present valuations or the market cap which we are seeing of Jet, at about Rs 5300 crore represents 76 percent stake. So, if you make a calculation of Rs 1800 crore divided by 2.73 crore shares that gives you a value per share at Rs 660 per share. So, if the shares are going to get issued to Etihad at about Rs 660 or Rs 665, I don’t think that share can move beyond Rs 630-635 even if it triggers the open offer and all sort of things. Hence, I am not taking a positive call on the stock beyond Rs 630-635. If you see today’s price move also, it moved to a level of Rs 640 but slipped quickly to the level of Rs 600. So, once the news comes out or the news gets consummated between Jet and Etihad I won’t be a buyer beyond Rs 640 that is the maximum, where as I said that profit booking will start coming in. If you want to play now for a smaller gain of about Rs 25-30 one can buy at Rs 600 and wait for that deal to happen and look to exit at about Rs 635-640. Q: Any thoughts on Crompton and what to expect tomorrow, the stock is down 2.5 percent ahead of numbers? A: I don’t think we are going to see any kind of respite for the stock. Their main business is going to show disappointment and even the overseas subsidiaries, which have been the culprits where they had gone for cost control etc will yield much results. So, again there will be disappointment but I have not yet crystallised the exact number on what all can be expected from the company.