Checkout: SP Tulsian's views on Dish TV, Alembic Pharma, sugar

SP Tulsian, sptulsian.com in an interview to CNBC-TV18 shared his views on stocks like Dish TV, Alembic Pharma, sugar stocks, SPARC, Sundaram Finance and others Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18. Anuj: The stock of the moment right now is Dish TV yesterday of course you were talking about it. We had the prima facie numbers after that I am sure you would have gone through all the details. What stands out that could be leading to this 6.5 percent surge right now? A: Yesterday, after seeing the results in fact the view which I expressed I hold the same view, I don’t think you have any cheer from the results thought it has been shown a marginal de-growth or maybe the growth in the subscriber and all that has not been to the mark and all that and company has been disappointing on the financial front for last 2 or 3 quarters, but again yesterday along with those dull numbers I have also said that the goods and service tax (GST) beneficiary if you really talk to the expert I think there is lot of confusion people are just taking a call only on the logistic stocks being the GST beneficiary, they have not been able to take a wide horizon and in fact really I have been hearing the experts they just give a general call automobiles, discretionary spending and all that unless until you pinpoint any particular company which will be seen beneficiary. In fact, in the past also I have given an example take the case of Dish TV you are supply hardware, you are supplying service component and in fact you are paying VAT and service tax both. In fact, in the past I gave an example of the air-conditioning servicing where the tax is paid on 140 percent because VAT department will say pay me tax on 70 percent component, service tax department will say pay me service tax on 70 percent component, so if both are paying 13-15 percent on 140 percent definitely they be all be seen beneficiary. So similar is the case with Dish TV also because they supply the set top boxes and maybe some other hardware so they are seen big beneficiary and I am not saying that that could only be the reason, but I think that sensing that maybe because of big beneficiary Dish TV seen to be because of this GST probably it has gone up or it has been moving up, but on a financial front or purely from the Q1 numbers I don’t think that you can really take a call, but yes maybe with a new CEO that also yesterday I have said that with the new CEO, Mr Kapoor having come in probably once he takes the charge and you can expecting kind of growth from here on, let’s presume that this seems to be the bottom for the financial performance of the company in this last 3 or 4 quarters. Sonia: From the pharma space Alembic Pharma is one stock I wanted to ask you about because you had been bullish on that stock for a while and the numbers look quite good for the company, a profit of growth of almost 50 percent, is this the stock that you are still back now post numbers? A: Yes, in fact, looking to the numbers I have reaffirmed my positive stance on the stock and if you really take a call amongst the midsize pharma stocks or the stocks which are not talked much, Alembic Pharma definitely falls in that category and this Q1 numbers have reinforced that stance on the stock.

Sonia: The pocket to really be in this afternoon is the sugar space, so all of your stocks Upper Ganges Sugar, Andhra Sugar, Dhampur, Bannari are all doing well. Just wanted your thoughts on any fresh trigger that you see in this space and would you recommend any stock to buy incrementally over and above the gains that you have. A: There is no increment news let first accept number one. Number two we have been seen the momentum in on many of these stocks, I don’t want to take a specific call on that. It is very simple we have seen two sugar results till now that is KCP Sugar and Ponni Sugar and if you have seen no one has this significant fresh sugar crushing having done in the Q1 that is for the June quarter in spite of Ponni and KCP both being in Tamil Nadu and Andhra and we all know that Tamil Nadu is only running, while Andhra, UP, Maharashtra everywhere the crushing has stopped, so the real results will all be seen from the UP based sugar companies from here on in which Upper Ganges, Oudh Sugar, Dalmia, Dwarikesh, Balrampur Chini, Triveni Engineering they all falls in that category and the kind of upsurge which we have been seeing in the sugar realisation at Rs 37 per kg for the UP ex-mills and I don’t think that there is going to be any reduction because the kind of consumption which we will be seeing from the festival season is all starting from mid August that is with the all festivals coming in, so I am keeping my positive stance on all those things suddenly in spite of the stock limit news yesterday we have seen some kind of profit booking coming in on those stocks, but again today it all caught up so maybe in anticipation of the excellent numbers to be seen from the Q1, for Q1 from the UP based mills this buying must have come. Anuj: The only number we have is net profit number. This has been one of your favourite stocks at least at lower levels, but do you think time for profit book here even if the numbers look good? A: Numbers are definitely looking good and I won’t be surprised to see the company posting a growth of 40 percent or maybe 45 percent for FY17, but I have been pressing my view yesterday in fact on a lighter note also, I have said that when you have recommended a stock at Rs 210 as a screaming buy, maybe 3 months back can you really justify a price of Rs 520-525 now. Coming on the second point the kind of run up which we have seen, in fact, I would call it as a irrational exuberance or maybe the frenzy on all these kind of NBFCs which we have been seeing lately for so many days or maybe for so many weeks and I am not honestly convince with those kind of valuation it is not compulsory that you must have the NBFCs in your portfolio at such an expensive valuation as a new investor and even if you have been holding them earlier you are getting a profit of 50-150 percent, no harm in booking profits and in fact that is what we have done in case of sugar also. The sugar stocks have risen by 300-500 percent in this last six months, still we have been advising profit booking and saying that be selective in buying the growth oriented sector, try to find out new ideas, because if you really take a call once the profit booking will start happening in all these NBFC. Take the case of Cholamandalam the results are seen to be quite flat, I am unable to understand that why this company has been able to show the kind of growth and performance which has been shown by the other finance companies, so there has been some kind of exuberance and at some point of time the profit booking will come which will be seen quite negative. Anuj: Any thought on SPARC? A: I don’t think that one can really expect any kind of profitability or turnaround for this company. If you are buying such stocks, you need to have a very long horizon because if you see this research arm, I remember maybe in this last 8 quarters in one quarter only the company has shown a big profit of Rs 40-50 crore in quarter, but if you are taking a call I don’t think that these are the passive kind of stocks where you need to have a very strong conviction, that maybe two years down the line, three years down the line, four years down the line you may see the blockbuster earnings coming in from the company, but I don’t think that those kind of temperaments are there with the investors now in this market, so better to avoid such stocks. Anuj: And what about Sundaram Finance if you track that stock? A: Again the same rider which I have just now stated for Ujjivan can get extended for other NBFC also. In fact, today only we have seen two NBFCs really disappointing one is Cholamandalam and second is Sundaram Finance so that is what my point is that don’t get so much exuberant on these stocks and mainly in the new entrant where the growths are only seen for the near term for one or two quarter because if you are taking a call on any stock at such a rich valuation, I am talking in case of Ujjivan, maybe Bharat Financial Inclusion or maybe Equitas you need to have a very long history of their earning and thereon you need to take a valuation call. So yes the disappointment is going to be there from the growth of the existing company also. So I am not honestly convinced with NBFCs, in fact, take the case of Capital First the kind of run up which you have seen in this last one week maybe to the extent of about 25-30 percent is all irrational so my general call is that go for profit booking in all the NBFCs which you have been holding.

Anuj: A word on some of these pharmaceutical stock names, I know you like Wockhardt and Glenmark Pharma but apart from that anything else? Post Dr Reddy Laboratories slide we have seen money shifting to some of other stocks, your thoughts on the space? A: Amongst the larger ones I do like any be Lupin also Aurobindo Pharma but may be if you give a thought to the smaller ones or may be the mid size one there are two or three stocks which comes to my mind. One could be Alembic Pharmaceuticals after seeing the results today. Second could be Dishman Pharma and third could be Torrent Pharma. All three are not seen moving much now but they can all be considered along with this three or four biggies which I just now stated. Anuj: At Rs 163 your call on Vedanta? A: I have already expressed my view that the kind of run up which we have seen in the stock price, has seen happening because to see this Cairn India merger going through. I am not convinced with this kind of valuations. You are right in saying that if you have seen Hindustan Zinc results have been flat. 65 percent of that gets added to Vedanta and going forward if you add the Cairn also, the holding of closer to about 60 percent that has not given them much significant profit because of the flat Cairn numbers we have seen. Now coming specifically on Vedanta again iron ore nothing can be expected. Copper I do not thing that must have disappointed because that keeps giving the consistent kind of performance. The aluminium segment which the company is holding again has seen a big drag of Rs 50,000 crore having blogged in that business. So, overall keeping a neutral to cautious stance on the share price of Vedanta. Anuj: What is your view on Zee Entertainment? It has been a stunning stock. A: I expressed my view after the results because the kind of fall which we have seen in the subscription revenue to the extent of about 10-11 percent on a sequential basis I was not very comfortable. Definitely the stock is seeing the momentum. I am not saying that the stock is bad but if you really compare it on a fundamental basis it is looking quite expensive. I won’t be surprised to see the share correcting by about Rs 25-30 may be in the next one week or so because the momentum which we have seen in the last three or four days post the numbers better expiry and then that momentum is seen continuing. I won’t be surprised to see the share correcting to a level of Rs 475 as well may be in the next couple of weeks or so. Anuj: A thought from you on Punjab National Bank (PNB), post the numbers yesterday your we have seen a significant decline now on the stock from Rs 132 now to Rs 123. How will you approach this one now? A: I am unable to reconcile with the numbers honestly that how they are looking good in any way. You have seen in absolute terms flat gross nonperforming assets (NPA), flat net NPA. Maybe the operating profit has remained flat. It is only the provisioning which has gone lower. We all know that in quarter four there was asset quality review (AQR) and because of that all banks have seen this kind of pressure. There is no credit growth; there is no income growth nothing. I am unable to understand yesterday I have seen both the numbers of PNB as well as Syndicate Bank and it reminds me of the Tata Steel – Corus kind of analysis where the analyst used to make analysis that EBITDA margin has gone up from USD 6 to USD 9-8 -12 this is not the performance which we are expecting from a bank like PNB and that to when the share has risen by 30-35 percent. Honestly, if you ask me one may say that three months is seen a too shorter period we may analyse the stock from many angle, recovery, fresh selling, fresh provision but if you see this broad numbers as I have said flat operating profits, absolute numbers, same GNPA, same NNPA so I am not at all convinced and PNB mind it that is a largest PSU banks, the nationalised largest PSU bank or the second largest after State Bank of India (SBI). If you have not seen any kind of this obviously the profit booking is going to come if the stock has risen by about 30-35 percent in this last 45 days. The numbers are disappointing and in fact they are really bad and no signs of improvement or any kind of revival has been seen at least from the PSU numbers which we have seen till now and in fact SBI associates two or three banks have really been big howler.