Bullish on cement till June; buy Exide at Rs 120: Tulsian

Exide collapses after disappointing set of numbers, revenue come in at 1450 crore year on year (y-o-y), lower than estimates of 1600 crore. Margins are lower at just over 11 percent versus expectation of nearly 14 percent. In an interview to CNBC-TV18, SP Tulsian of sptulsian.com sees good support for Exide at Rs 120 and considers it as a good entry point for short-term.

Further, Tulsian is bullish on cement stocks till this June, may be for next six months or so considering the robust demand. "Any corrections in ACC, Ambuja and Ultratech should be used as a buy opportunity at the lower levels," he adds. Below is an edited transcript of Tulsian's interview on CNBC-TV18 Q: Do you think the story is over for Exide or would you advice a contrarian buy over there?
A: You can't write-off the company, but the performances have been very pathetic and the disappointment is more from the guidance. This is because the management in Q2 said that the second half looks better. They are looking to improve their margin and have given full year guidance wherein the resultant figure looks to be quite good.
Considering all this maybe Rs 120 looks to be a good support where even the investors can enter into the stock because you cannot write-off the company. The company is struggling, but it ruled in trade a couple of years back in the range of Rs 160 plus.
It has not broken Rs 150, the data can be verified but for the last two years, maybe six-seven quarters have been struggling. Rs 120 is always seen as a good support though it has corrected to as low as Rs 105-110 last year. But maybe Rs 120 makes a good entry point from short-term view. Q: What is your view with regards to cement companies now? How exactly is this going to affect the P&L?
A: The correction which was expected for all the cement companies like ACC, Ambuja, Ultratech, I was expecting them to correct by about 3-4 percent, but the same correction has not being seen in all these stocks and more in Ultratech which corrected below Rs 1900, but again bounced back and are weak by just one percent or so. That shows the pricing power lying with these companies.
I am not focusing on the larger ones from Monday onwards. This is because considering the robust demand of the cement across the country, we are likely to see some because of the calculation made by these companies at which the bulk diesel purchase at the open market rate will be expensive by Rs 10 per litre and the impact, because that can be calculated and correspondingly we will see the increase in the cement prices.
I don't think that there will be any kind of hue and cry by the government or any regulatory actions being taken. Considering the pricing power lying with the company, the stocks have not really corrected. I have been holding a positive stance on the cement stocks till this June, may be for next six months or so considering the robust demand. So, any corrections in ACC, Ambuja and Ultratech should be used as a buy opportunity at the lower levels.

Q: Have you managed looking at NIIT Limited numbers? The stock is down around 5 percent. Consolidated net profit came in at Rs 50 lakh with a margin of around 3 percent this time around.
A: I have not gone into the details. Rs 50 lakh and 3 percent Earnings before interest, tax, depreciation, and amortisation (EBITDA) margin looks pathetic. We have been seeing the corrections in all the IT stocks or may be even the smaller ones, in the form of profit booking or the disappointment on the numbers. NIIT is also falling in the same category.

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Q: How would you approach United Breweries now after all the news flow surrounding it? The stock is down about 7.5 percent and we have seen a couple of brokerage downgrades coming on United Breweries as well. What do you see from here?
A: Sometimes you have contradiction in these reports or recommendations also when the stock moved to about Rs 900 plus. A couple of months back I said that I don't understand the valuations with Re 1 face value in spite of they being the largest beer maker in the country having 50 percent market share and half of their promoter stake 37.5 percent is held by Heineken and 37.5 by UB Group. Since the share has been corrected to about Rs 675, Rs 650 makes a good entry point.
In case of United Breweries we see a lot of volatility or price fluctuations over longer span of about three-six months. We may see a price of Rs 880-850 because the promoter stake is 75 percent, institutional investors holdings are close to 10-15 percent plus.

There is a very low market cap and the perception, conviction on the stock by those investors is very high. So, I don’t understand this correction but may be a level of Rs 650-660 can be entered into and from two-three months perspective, I won't be surprised to see a price of Rs 850 going again and again. We will start seeing positive buy recommendations coming on the stock at those levels.

Q: What will be the one key parameter with regards to Wipro which was more disappointing, the volume decline on a sequential basis or the guidance which was quite tepid for the company going into the next quarter?
A: It is only the guidance, because the USD 1.58 to 1.62 billion which they have already achieved closer to USD 1.57 billion and the guidance which has come, I am not saying that one should look for the lower end, but even the body language or may be the things have been very cautious. So, it is purely to go with the tepid guidance which the company has given.

Q: This week we have seen a 7 percent move on Reliance Industries. We know what you are expecting in terms of Gross Refining Margins (GRMs), but on the share buyback issue any announcement that you are expecting from the management today?
A: I do not think there is any extension provision available under the Securities and Exchange Board of India (SEBI) buyback rule, because the buyback window remains open for a maximum period of 12 months and gets lapsed if the buyback has not been affected.
Now, with a caveat that the company have to buyback at least 25 percent, but Reliance Industries has bought back close to 40 percent of the 12 crore shares which they were intending to. They bought back about 4.8 crore. So, this extension cannot happen. This has to lapse tomorrow. Tomorrow is the last day and it has to expire tomorrow. If for some reason the company has to revive the buyback then they have to make afresh, but the extension cannot happen.

Q: Next week we have earnings from capital good names like Larsen and Toubro (L&T) Are you expecting to see any big shocks this time around?

A: I am not expecting any disappointment from L&T, because they have been consistent in posting the numbers. All the margins are maintained, but may be with respect to the other capital goods, BHEL and Crompton Greaves will be the closely watched. I won't be too disappointed or apprehensive on the Thermax numbers as well, though the management has been cautioning, they have also reduced the workforce. However L&T should be on expected lines, BHEL and Crompton Greaves may disappoint, Thermax can be more or less on the flat lines.