Nifty likely to see 6150 in January series: SP Tulsian

In an interview to CNBC-TV18 SP Tulsian of sptulsian.com holds a positive stance on the January series and expects Nifty to touch 6,150 then. He expects the December series to expire at 5,900. "The chances of expiry at 5,800 is 33 percent and at 5,900 its 67 percent," he added.

Meanwhile, Tulsian is bullish on cement stocks and expects cement demand to be robust in the next six months. "One can keep an eye on midcap stocks, like JK Cement, JK Lakshmi, Dalmia Bharat Enterprise, OCL India, Mangalam Cement and Binani Industries on the list," he recommended. Below is the edited transcript of his interview to CNBC-TV18 Q: Do you concur with this view that you need to see more follow through on the upside to have more convection or do you think that there is fresh long positions that are already getting added in today’s trade itself which is justifying the kind of up move that we have seen? A: First, we have to focus on the expiry. I am expecting expiry to happen at 5900. On Monday, I had said that the chances of expiry at 5800 is 33 percent and at 5900 its 67 percent. We can see the part of index management happening at 5900. Since, we have seen that level having touched today itself, tomorrow will be a range bound day. For the January series, starting from Friday, definitely as a part to prop up the NAVs of all the funds, even the fund manager’s bonus, the returns are calculated on calendar year basis. We will be seeing positive days ahead. Going forward, for the whole of January series we have some events lined up there in the form of the rate cut expected by Reserve bank of India and some policy initiatives by the government. Taking all this into consideration I am keeping my positive stance on January series with target of 6150 on Nifty. So, this is the scenario. Q: Your opinion on the Care listing? A: It is very much on the expected line. If one see's the FY14 earning, I am expecting that company should be able to post a PAT of close to about Rs 120 crore. This should translate into Earnings per share (EPS) of Rs 42. For FY13, the EPS is likely to be between Rs 37.5-38. Taking FY14 earnings, the share is ruling at a price-to-earnings (PE) multiple of 22-23. If you see the other comparable peers, they are ruling at a PE multiple of 30 or more. In fact I am keeping my positive stance on the stock. I expect that may be in the next six to eight months – once you have your FY13 getting over and once Q1 results start coming out may be in next six months or so – by then the shareholding pattern also goes into the quality hands. You see the traders exiting from the stock and all sort of things and I won’t be surprised to see a price of Rs 1100 may be in next eight to twelve months or so. Q: Any thoughts on Binani Industries? It has hit a 52-week high on the talks of a stake sale in Binani Cement. What could the positives be and how much more of an upside would you give Binani Industries if this comes through? A: If you take an overall call on Binani Cement which is the 97 percent subsidiary of Binani Industries, Binani Cement they have a capacity of 6.5 million tonne operational in India. Apart from that they have the operational capacity in Mauritius as well as in China and in India at two locations they have been adding the capacity, they are setting up the grinding unit. If I take the average capacity for the sake of simplicity and taking a valuation call on the entire capacity, if I just take the average capacity of 10 million tonne and if I take a valuation of USD 150 per tonne also, that gives you a valuation somewhere at around may be Rs 8,000-8,500 crore. If you see the kind of appetite the private equity investors have, we have discussed that also last week that the PE investors are really having strong appetite, they have in fact made good investments in the Dalmia Bharat Group companies like OCL, Dalmia Bharat. So, here also I see that happening because the board has authorised or the board has taken a decision to shade 40 percent stake in this Binani Cement. I am expecting the valuation to be derived at about Rs 7000-7500 crore while striking a deal with PE investors. If you really see the debt in the books of the company, they have the debt of close to Rs 3000-3500 crore because the debt has increased because of some acquisitions by the company in the fiber glass segment also. If you take the operational performance of Binani Cement, for FY13 they should be able to post a top-line of Rs 3000 crore with bottom-line or profit after tax (PAT) of close to Rs 300 crore. Going by all these things I am having quite bullish view on the stock, in fact I have been taking this call for last six months that the management will be forced to dilute their stake in the company. In fact I was taking the call for the entire stake sale also in Binani Cement, but that is not happening now because management have acquired or management has delisted Binani Cement a year back when they have acquired the residual stake from the company. So, I am keeping my positive stance. One should really look for the time horizon of two to three months where the expected price could reach at about Rs 180-185 level or so. Q: What are your thoughts on RCF? Once the divestment does come through do you think that it will generate a lot of interest especially from the retail side? A: I don’t find any interest in the stock. Right now, there are two fertiliser PSUs, one is RFC and second is National Fertiliser. In RFC, the public float is 7.5 percent and in NFL it is about 3-3.5 percent. The share prices are ruling because of the low float. Once the divestment of RFC happens by another 12.5 percent the public float will increase to 20 percent. In fact, I expect the share price to rule on the lines of Hindustan Copper. The profitability of RFC is not very exciting. The EPS is around 4-4.5. Even if one gives a PE multiple of 10-11-12 which seems to be quite stretched, the share should rule at Rs 50. So, all these things look like more of a trading bump. I don’t think the offer for sale will drive or will evoke response of more than Rs 50-Rs 51. Though the expected target from sale of 12.5 percent is likely to be anywhere at about Rs 400- 450 crore. However, I am not too optimistic or bullish on the share price fetching the higher price than what it is ruling at. Q: What is the expectation from PC Jewellers? Do you think that listing will go smoothly or will there be jinx there? A: No. I am not too excited on the issue. I am not saying that the valuations were looking stretched but there won’t be much interest by the public in the issue. Maybe the issue should rule at its issue price. In these issues it is very important to see the post listing activity which we generally see. The case in point is TBZ and MT Educare is in the upward moves. I have been keeping my cautious stance. In fact, TBZ got listed, ruled below issue price for a month. Thereafter we have seen the stock almost doubling. So, we may have such activity in PC Jewellers also. The share could rule at a nominal premium of couple of rupees over the issue price but then there won’t be anything exciting. Q: There is one brokerage which has a view with regards to Cairn India and a target price of around Rs 400. Would you subscribe to that much of an upside for Cairn? A: I don’t know the time horizon that has been spelt out. However, it depends on the crude price behaviour. I don’t expect that in 2013 one is going to see the crude prices hardening. That will be seen neutral to mild negative for the stock. So, I won’t be keeping a target beyond Rs 360 for whole of 2013 on the stock. Q: Are there any cement companies that you are specifically betting on and at what stage of the cement cycle are we in currently? A: For the next 6 months, cement demand is going to remain quite robust. We are going to see price increases. I am expecting them to be seeing this as a first round of price increase. Maybe the second round can come after couple of months when things will start picking up further, from first week of March. One can keep an eye on the midcap stocks, like JK Cement, JK Lakshmi, Dalmia Bharat Enterprise, OCL India. All these companies are ruling at a PE multiple of 6 to 8. One can also add Mangalam Cement and Binani Industries on the list. Apart from that, the trading interest continues in shares like UltraTech, ACC, Ambuja Cement, Shree Cement. Across the board a positive call on all the cement stocks.