Bull's Eye: Mah Satyam, DB Realty; short JSW Steel, BPCL

Bull's Eye, CNBC-TV18's popular game show, where market experts come together to dish out trading strategies for you to make your week more exciting and compete with each other to see whose portfolio is the strongest.

Remember these are midcap ideas not just for the day, but stocks that look attractive in the medium-term as well. This week, SP Tulsian of sptulsian.com, Ashish Kapur or Investshoppe and Saurabh Mittal of Swadeshi Credits battle it out for top honours SP Tulsian of sptulsian.com Buy Mahindra Satyam with a target of Rs 71 and keep a stoploss at Rs 65. The company has posted very good numbers for Q4 where an EBITDA margin has increased by 136 bps on a sequential basis with Q4 EBITDA margins placed at 17.54%. The Q4 PAT of Rs 525 crore will be seen quite positive by the market though it includes an exceptional gain of Rs 109 crore and tax ride back of Rs 94 crore but still overall EPS of Rs 11 plus for FY12 will be seen quite positive by the market. Buy Tech Mahindra with a target of Rs 640 and keep a stoploss at Rs 598. The better result posted by Mahindra Satyam will be having a reflection on the share of this company also because Mahindra Satyam is merging with Tech Mahindra on a swap ratio of two shares of Tech Mahindra for every 17 shares held in Mahindra Satyam. Even the working to be declared by Tech Mahindra on 23rd May for Q4 is likely to be good. Buy HDFC Warrants with a target of Rs 54 and keep a stoploss at Rs 44. One warrant entitles the warrant holders to subscribe to one share of HDFC at Rs 600 by August 2012. The stock HDFC has been witnessing renewed buying interest after the MSCI goof up and the positive view on the stock is likely to continue. Hence this seems a very good arbitrage play of buying HDFC Warrant instead of HDFC shares. Buy Shalimar Paints with a target of Rs 524 and keep a stoploss at Rs 473. The stock has yesterday seen the informed buying and in fact for last one week the share has been seeing the delivery based informed buying largely because of the better Q4 numbers having posted by the company with EPS of close to about Rs 16 and EPS of close to about Rs 39 for FY12. But it is learnt that the stake sell by the promoters are likely to happen in the near future and hence the share is seen under accumulation by the informed circle. Disclaimer: He has a holding in HDFC Warrants. Stocks discussed may have been recommended to clients. _PAGEBREAK_ Ashish Kapur or Investshoppe Buy DB Realty with a target of Rs 79 and keep a stoploss at Rs 71.50. This company has got beaten down very badly over the last one year due to various controversies surrounding it including the telecom scam. But all that seems to be passed with release of Mr. Balwa. I think the fact is that this company is available now at a very cheap valuation. It has a lot of prime residential space especially in south and Central Mumbai which augers very well because that is a premium part of Mumbai. So we feel that all the negatives are already factored in. Buy Max India with a target of Rs 208 and keep a stoploss at Rs 189. The company is slowly and steadily getting out of its unrelated businesses like polypropylene film, specialty films division and that’s going to result in a significant cash flow for the company. Second is that New York life recently exited the company and sold its stake to Mitsui Sumitomo. The value of the business of Max India is nearly the same as market value of the total company.
Short JSW Steel with a target of Rs 568 and keep a stoploss at Rs 622. We remain bearish on JSW Steel because this is one company which has a very high leverage on its balance sheet, is not fully integrated. So we will get impacted by the rising or any change in the cost of raw materials. Also the company is yet to recover fully from the impact of the mining ban in Karnataka. Though there has been a resolution to it but by the time the issue is completely resolved it may take some more time. Short Patel Engineering with a target of Rs 80 and keep a stoploss at Rs 88.50. Patel Engineering is one infrastructure company where the future looks very bleak at least for the near term. The company is carrying a huge amount of debt. Has a stretched working capital cycle and also many of their projects are facing rough weather and they have been in news recently for wrong reasons. So there is ample reason to believe that any weakness in the market would result in further slippage in prices of Patel Engineering. Very safe stock to go short on if you want to hedge your portfolio.
Disclaimer: He holds Max India and JSW Steel. _PAGEBREAK_ Saurabh Mittal of Swadeshi Credits Buy Unitech with a target of Rs 23 and keep a stoploss at Rs 20.50. Unitech showed some strength couple of trading sessions back and it has taken a big beating in the last couple of months and I think it’s ready for a technical bounce once the market behaves or if there is a technical bounce in the market I think Unitech will show decent appreciation. Buy Tata Global with a target of Rs 112 and keep a stoploss at Rs 105. Tata Global is also one of those stocks that trades between a range of about an Rs 100-120 and has fallen and it showed some strength couple of trading sessions back. So I expect this to go up with the market for another three or four percentage points in today’s trade. Buy Reliance Industries with a target of Rs 700 and keep a stoploss at Rs 678. Reliance Industries also has not performed well for the last few months and I think all the bad news is out for the stock. It has started showing some strength in the last couple of trading sessions and the markets were down, this stock held up and I expect it to show some further strength for today’s trade. Short BPCL with a target of Rs 728 and keep a stoploss at Rs 745. BPCL and the oil marketing companies have shown decent strength with the fall in crude prices overseas. I think that has played out for a while and you might see some sort of profit booking and a little bit of downside for these stocks. So for today’s trade I am shorting BPCL. Disclaimer: He doesn't have holdings in any stocks discussed but may have recommended them to clients.