Speaking on various stocks, SP Tulsian of sptulsian.com says Bharat Forge is a good stock if one has a medium-term view of 12-18 months but for those with short-term timeframe can book profits.
He does not recommend buying Bharat Financial Inclusion at levels of Rs 850.
With regards to Aurobindo Pharma, the news of likelihood of promoters selling stake should not be taken as negative and is positive on the stock.Tulsian also shared his views on RIL and Axis Bank
Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18. Sonia: I wanted to ask you about Bharat Forge, because that stock has been surging and I remember when the numbers came out, you said that this could be a bottom formation for the stock and since that the stock has been soaring, at this price do you think Bharat Forge is still worth a buy? A: It is good that you have referred that old discussion which we had and in fact thereafter we had a bull and bear case also where I have said that I am taking a bull position and if you really take a situation, the management commentary on the North American truck orders and all sort of things, the kind of projection they have given for FY17 and see the combinations, they are into the auto ancillary, they are into the defence and we have in fact seen the controversies keep erupting, maybe on the financial performance or maybe on the subsidiaries stake sale dilution by the parent that is Bharat Forge, but I have been keeping quite a strong view on the stock and in fact when we discussed that on the bull and bear case also at that time it was ruling at closer to about Rs 650 and now it is ruling to Rs 950. See again it depends on your time horizon. If you want to have a limited time horizon of couple of months, I won’t hesitate in advising you to go for profit booking, but if you have a view of 12-18 months, I won’t be hesitate to see it to moving Rs 1,200 also, because you just cannot take a view on such stocks looking towards one quarter numbers. Maybe, one quarter numbers can be seen as aberration, but the view has to be taken over a little longer period, so I am keeping a very positive view on the stock as I said that maybe within 12-18 months, we can look for a target of 12 months, but if you are a near term trader or maybe a near term investor I won’t hesitate in advising profit booking, because it has already seen a run of close to 50 percent in this last 3 months or so. Anuj: The other stock that I want to discuss with you is Bharat Financial Inclusion, Rs 850 now on that stock agree that qualified institutional placement (QIP) demand was really strong, but that was at a particular price, now that price is much above that, but at current price of Rs 850 what next? A: I won’t be a buyer, let me add two points here, this I have referred at the time of the Yes Bank QIP if you recall when it was ruling at Rs 1,400 plus or maybe Rs 1,450 because generally I am not trying to be blunt and trying to blame anyone, whenever you see this QIP the aggression or market making or the momentum is start seen building up in that particular stock and in fact that is seen very negative, in fact mild up move or maybe mild momentum was seen happening in the Motherson Sumi also and the victim of this momentum was seen as Yes Bank where the issue has to get called off. Similar is the case with Bharat Financial also, because if you see the nature of this stock has been very volatile. I am extremely positive on the NBFC stocks or maybe the microfinance in which the Bharat Financial Inclusion also falls in the same category, but let’s not forget that if you take a range of this stock of last two or three months, it has a range of Rs 700-950 that such a wide range is seen very damaging, because it is very difficult for anyone to take a call on the direction of the stock and looking to the QIP having got over, I won’t be surprised to see the liquidations and profit booking coming in, which is possible or which is likely in this series itself and won’t be surprised to see a level of Rs 810-815 also, so naturally buying is not advise on the stock at the current level and profit booking can make it correct further by about 5 percent from here.
Anuj: Your thoughts on Aurobindo Pharma, this is one of the stocks that you have liked in the pharma space? A: That you are right in saying that in market they don’t like promoter selling stake, but here I think one has to read the this news in a totally different context, if you see market cap of a company Rs 50,000 crore, promoter are having stake of closer to 54 percent, so they must have taken a conscious decision of keeping a stake of 50.1 percent for whatever, even if it goes to 49 percent doesn’t matter, because as the news was broke out by our colleagues that 3-4 percent is being looked into, so I am confident that maybe management will keep a 50 percent plus kind of stake, maybe 50.01 percent and that’s a conscious decision, because the company has grown to such a big size of Rs 50,000 crore and if you shred your 3-4 percent, I don’t think this should be read as negative, but there are all this mechanical effects which come into the market that whenever you see the promoter selling the stake you take that as negative in the first place. I am not disturbed by this one. I am keeping positive view, because if you go by this fundamental Rs 16,000-17,000 crore top line in this FY17, maybe PE multiple of Rs 17 EPS could be anywhere around Rs 48-49, so I think with this kind of things, the kind of growth, the kind of management developments, Q1 results all things are pointing quite positive for the stock and I am keeping my positive bias on the stock. Sonia: I know we have discussed this in the past, but just wanted your view on what the medium term outlook for Reliance Industries is. It already seen almost 20 percent rally now in the last 3 months, you expect more upsides here? A: If you are taking a medium term view that means we are taking a view of anywhere between 3-12 months, because that’s how loosely we define the medium term and for that you need to factor in the telecom revenue and telecom profitability. We all know that till December it is all free, maybe till December to March it will be consolidation and mobilising the customers and also FY17 don’t expect much and maybe for FY18. I am not expecting looking to the management commentary of margins of higher teens that if you refer that as earnings before interest, tax, depreciation and amortization (EBITDA) margin or the operating profit margin I am not very clear, but if you take a revenue of maybe Rs 50,000-55,000 crore in the first year also that is FY18 and if you have a margin of 20 percent also the higher teens, which has been referred to, that gives you a gain of or maybe margin of closer to about RS 12,000-13,000 crore which will not be enough to meet the interest and depreciation, because let’s not forget that the interest amount will get start charging to the P&L on a capex of closer to about Rs 130,000 crore, so I am not keeping the positive stance on this telecom stock and I don’t have the extremely upward bias seen on the existing business of refinery and petrochem also. I am keeping a neutral view and even those who have been holding the stock I won’t hesitate in advising the profit booking at Rs 1,100 level.
Anuj: I wanted your thoughts on how to approach Axis Bank from here, because clearly this overhang is now there that SUUTI stake sale, you won’t have generated this kind of volumes otherwise. How do you approach this stock now? A: If you see which I have discussed in the past also that Axis Bank is seen as the worst amongst the private sector banks with weak fundamentals, weak outlook and this SUUTI stake sale I am not honestly if you really ask me, I don’t see that SUUTI stake sale is going to happen in the next couple of weeks also, but today the volume which we have seen of closer to 3 crore shares that will definitely be translating into the delivery selling by the institutional investors and more especially the foreign institutional investors, so maybe this is seen as a one day phenomenon, I won’t be expecting the weakness to be carried over on Monday. In fact, this is a typical case where you see the negative pessimism building up on the same day like which we have seen in Jubilant Food and from the next day, the cycle turning off, so maybe the because the stock has in fact risen to a level of Rs 630 if you take the trading chart of the stock for the last couple of week and at that time lot of long positions also got created and maybe the near term investors also got entered into. This short term or maybe the near term of this painful selling is seen today and the maximum poison will be out and I am expecting that maybe from Monday to expiry in those next 4 days, you may see the share recovering by 3-4 percent that is just pure technical call, while the fundamental view on the stock remains weak on a longer horizon.Disclosure: Network 18, which publishes moneycontrol.com, is now part of the Reliance Group.
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