Bullish on Spicejet; upbeat on Yes Bank Q3 result: Tulsian

Strong corporate earnings reported so far and expectations of a generous rate cut by the Reserve Bank of India (RBI), the Sensex closed today at 19987 up 80 points and the Nifty closed at 6057 up 33 points.

After Infosys and TCS, it was Axis Bank's turn to surprise the market with better-than-expected third quarter numbers. Net interest income rose 17 percent and net profit by 22 percent; but more importantly, the bank managed to keep its asset quality stable.

SP Tulsian of sptulsian.com told CNBC-TV18 that he is bullish on the Spicejet and Qatar Airway due to the Jet-Etihad deal which will be quite positive for the stock. Further Tulsian is quite positive on Yes Bank numbers due tomorrow due to robust numbers posted by the Axis Bank today. He expects a bottom-line close to Rs 325 crore with earnings per share (EPS) of close to Rs 9 for the stock.

Below is an edited transcript of Tulsian's interview on CNBC-TV18 Q: Today results have been good, but Reliance is out on Friday. So far the stock has not participated too much in the rally of the last few days. What do you expect to see on Friday?
A: I have not taken a close call on the numbers, but because the Q2 numbers have been very good and market is expecting –I will be taking the cues from Essar Oil today. They will be announcing the numbers and gross refining margin (GRM) is very crucial. Essar oil had a GRM of close to USD 11 in the month of September though they had about USD 8 for whole of Q2.

So the key for Reliance Industries will be GRM, whether they can improve upon the GRM from what they posted in Q2 and second is the petchem. The upstream is going to be a disappointment and nobody is factoring in anything over there. So a neutral kind of thing is seen, the results are not likely to be better than what the company has posted for Q2. Q: What is happening with telecom today? Both Bharti and Idea are just flying away.
A: It is strange. Honestly, I do not see any fundamental reason for these stocks to move up and more especially ahead of the numbers, because you have the caution at least on the numbers of the Bharti Airtel and I do not find any reason for the stocks to move up. All the telecom stocks whether Idea or Bharti. Idea has been moving up for last seven to 10 days, Bharti has caught in these last two or three days, but honestly I do not know the reason for this sudden upmove.

_PAGEBREAK_ Q: Have you taken a look at Shalimar Paints and any recommendations between Shalimar Paints and Berger Paints?
A: Shalimar has posted very good numbers. They should be able to close FY13 with an EPS of about Rs 8 and if that translates into its ruling at a PE multiple of 15-16 while all other paints like Asian Paints, Kansai Nerolac or Berger Paints are ruling at PE multiple of 25 plus. There has been this long overdue buzz of the stake sell by the promoter, 62 percent stake which is held equally by Jhunjhunwala and Jindal.

Last week we had the strike negative news on the stock that one of the plants has seen a negative because they have three plants. Numbers have really been good with Rs 2.5 EPS for the quarter and same trend of profitability is likely to continue. So, it seems to be quite an undervalued stock and that is why we are seeing such a big upmove.

Q: JP Power has struggled post its results, post all the talk of capital raising. Were you disappointed?
A: I had not expected that kind of number though Q3 is always dull because in Q2 they had a good hydro power mix. Q2 is always good but Q3 has been a disappointment with net loss of close to Rs 100 crore. Now they have the huge capex lined up and with the equity dilution coming in, it will be difficult for the company. So Q3 has really been a big disappointment. Q: You have been watching Bharti Airtel for sometime now, what do you think of Sanjay Kapoor stepping down as the CEO?
A: This shows the dissatisfaction or agitation at the top level which the market has been very uncomfortable for last four quarters. This should have happened couple of quarters ago. Though we may say that one person doesn’t make much difference but ultimately we do take a call on the leader always. So, this must be happening for better but one has to see how long will it take. Ultimately things must get reflected into the performance so the next two quarters that is March and June quarter will be very crucial for the company to post its performance.

Q: How would you play Spicejet and Qatar Airway picking up stake now?
A: I am having a positive view because Jet-Etihad deal is likely to happen may be by the end of January and if that deal happens may be at an enterprise value of close to USD 5 billion, about Rs 25000 crore and now Spicejet having an enterprise value of less than USD 1 billion, I think that is going to be quite positive for the stock.
I am keeping a positive stance and if you see the comments or the indications from the management, they are in talk with many of the potential acquirers and many of the airlines from the Middle East are interested in acquiring stake in some airline of India and only two or three players are available as of now. So, I am having a positive view on the stock.
_PAGEBREAK_ Q: TTK Prestige had a great run. It has moved from Rs 2,300 to Rs 3,500 in 2012 itself. What are your expectations from TTK Prestige this quarter and any recommendation on the stock?
A: The stock will continue to remain in a firm grip. If you see the Q1 and Q2 numbers which have not been very great, the stock having corrected by Rs 250-300, but again bounced back. Maybe Rs 3,300 now looks to be a strong support for the stock and this has become a very safe stock for the traders or maybe for the short-term investors.
If the results are good it is bound to go to Rs 3,800, but if the results are weak, it may come down to a level of Rs 3,300-3,350. I think that makes a very good entry point for the short-term investor because I do not think that even the bad results are having any negative reflection on the share price for a longer time. Q: Yes Bank comes out with numbers tomorrow. What are your expectations? How much more of an upside do you see in Yes Bank considering it has gone up over 80 percent in one year versus the bank Nifty which is up 45 percent?
A: After seeing the robust performance from Axis Bank, I am quite positive and upbeat on this bank results as well. I am expecting bottom-line close to Rs 325 crore with earnings per share (EPS) of close to Rs 9. Looking at the asset quality, they already have good non-performing assets (NPAs) under control with gross NPA of 0.25 percent and net NPA of five basis points.
I don’t think that we are going to see any deterioration, but even if I take the EPS of close to Rs 33-34 for FY13, the stock looks little expensive because now it is ruling at a price-to-earnings (PE) multiple of close to 18. Even on price to book, it is ruling at 3.45 to 3.50.
I am talking on as of the present value. Once they go for the equity dilution which will definitely happen in the next be 8-12 months, then the price to book will fall to about 2.6 to 2.75 and may be on an earning multiple also, on the forward earning it will look little economical may be at a level of 14-15. The share price should take a pause at a level of Rs 525-530, but the expectations from the results are very good with EPS of Rs 9 and no deterioration on the asset quality.