Positive on BHEL: Tulsian

SP Tulsian of sptulsian.com, says that he has a positive stance on BHEL since the stock corrected to Rs 200. Even if they post an EPS of Rs 5-6 for the second quarter but the order execution will happen in the fourth quarter. One can expect an EPS of close to Rs 21-22 for whole of FY13.

Below is the edited transcript of his interview to CNBC-TV18. Q: What is your view on GAIL numbers?
A: The numbers are more or less in line. Petchem has been a big surprise in spite of higher provisioning on Jamnagar-Loni of Rs 125 crore. Q: How much volume growth do you expect for HUL if it comes at 7 percent mark?
A: The market will not like volume growth of 7 percent and top-line of sub Rs 6200 crore. We need to check the extraordinary or other income component in the PAT, the numbers are not very encouraging. Q: How do you see HUL heading from here? Do you think the earnings upgrade cycle that HUL has got used to have peaked out and beyond Rs 550 level what would you justify?
A: The stock looks quite expensive and there are limited chances of an upside. The company will not be able to maintain a volume growth of 8% or more. In fact the surge in share price in last three months has not been sustainable. Whenever there is an opportunity in another sector, investor's shifts from the defensive sector, similar is the case with HUL and ITC. Despite better numbers on all the parameters, ITC is still correcting. A correction or profit booking may come in and the stock may correct by 3-4% from current level to Rs 530-535 the renewed buying will come in the stock. Q: What is your view on HCC numbers?
A: The losses have come down and the numbers are not exciting. It is very difficult to make out if some of their contracts must have gone well with them. The contract or portfolio held by them looks quite risky. It is difficult to take a call on the profitability and consistency.
One cannot take a call as to what will be the profitability and consistency. While comparing the March quarter they had higher other income in this quarter they had lower – in spite of the lower other income they have shown lower losses. There are issues with respect to corporate governance, Lavasa project not kicking off as expected and the comparative and relative performance of their real estate business. Q: What are your expectations from SKS Microfinance numbers?
A: The management has indicated that Q3 will be in the bottom and black and if you take the call on Q1, the losses will get further pruned in the Q2. I expect the net losses to be in the area of Rs 10-12 crore, and if that happens it will cheer the market. Q: How would you approach HUL?
A: Investors should not enter the stock at the current level. However, traders can enter into the stock at Rs 535-540 level. The stock can touch Rs 570 in this series itself. Q: What is your expectation on Sesa Goa and JSW Steel?
 
A: It will be a wash out for Sesa Goa. Their Q2 performance has always been poor. I am excluding the profit share from Cairn, which they hold to the extent of 20 percent, their PATis at Rs 200 crore. For the whole of FY12, their PAT was Rs 2100 crore. The core operations will show negative bottom-line, but again 20 percent of Cairn profits will be added. There will not be any excitement in Sesa Goa going forward unless Sterlite is merged into the company and emerges with the new avatar with presence in Hindustan Zinc, Cairn India and other things.
I am not excited with the performance of JSW Steel. All ferrous metal producers like Tata Steel, Jindal Steel and Power, JSW Steel will remain quite. Results of Tata Steel and JSW Steel will remain subdued. Q: What is your view on BHEL ahead of results on Monday?
A: I have a positive stance since the stock corrected to Rs 200. Even if they post an EPS of Rs 5-6 for the second quarter but the order execution will happen in the fourth quarter. One can expect an EPS of close to Rs 21-22 for whole of FY13. Any positive surprises coming in for Q2 numbers can take the stock moving back to Rs 245-255. However, the valuation has reached an optimum valuations. The price of Rs 200 was the knee jerk reaction to the stock price. Logically, it should now rule in the range of Rs 240-260 even post numbers.