Checkout why Tulsian has turned cautious on cement stocks

However, with the kind of run up which we have seen today some news flow must be lined up there and there must be some reasons for it to rally.

So purely on a fundamental basis for which you need to have a little longer time horizon, which maybe of about six months or so then I think that probably this can be the best midsized pharma stocks on a relative performance to give you the maximum gain.

Sonia: One of the stories of the day clearly is Anant Raj and we spoke to you about this earlier in the day. It went up 20 percent now post that demerger news. You think the best is in the price or is this still a multiyear story and one can still get into it at Rs 50. A: Sometime market goes overboard, if you see the restructuring, the project division have been removed, but on a consolidated basis or a net worth basis. I agree that the monetisation and all those things if it happens, then that is seen quite positive. The debt of the company which is seem closer to about Rs 1,200-1,300 crore are not going to get reduced, but market feels that this restructuring will happen maybe in the next 15 days or 20 days, while this move will take at least six months or so to get the new shares listed number one. Number two, still people have the mentality of taking bonus or the split or maybe this kind of restructuring move as very positive thinking that the absolute number will increase by to that extent that means they will increase by 100 percent. In case of this also they will get the equivalent shares of the new company, but this is just a mild positive move. Actually, I would say that this is a belated move on part of the management. They have been talking for last couple of years to hive off, because if you see their presence they have good amount of annuity business.

I have said in the morning also of the leasing of the property and all that. In fact, you can compare them with the Oberoi Realty and in fact that’s the reason I never like this type of companies those who are earning the annuity kind of income, because that’s not their cup of tea, because now Oberoi Realty owning a 5 star hotel in Goregaon with a valuation of Rs 1,500 crore or Rs 1,800 crore and if they realise a return of maybe 3-5 percent on the net present value, I am not convinced with those kind of things. In fact, they should liquidate and go for the development, so similar is the case herewith Anant Raj also, but anyway market has taken this move of restructuring quite positively and the over enthusiasm is seen in the share price. However, I won’t be buying because I have a buy call on the stock about three months back, since then it has risen by about 30-35 percent, so my advice is that those who are holding the stock they should book the profit at the current level. Sonia: I wanted to ask you your thoughts on Uflex, some of these packaging companies have been doing exceptionally well, I mean Uflex is sitting at a 52 week high rather, what would your recommendation be here? A: After this run up, I don’t think that you should look to the stock now, but yes you are right that all the packaging stocks have been moving up except one that is Jindal Poly, in fact that stock has not really participated but otherwise you really see Cosmo Films or maybe the SRF, because SRF is also having a division amongst the packaging film and all that, but maybe at the current valuation for Uflex after having seen a run up today, I won’t be giving a buy call now.

Sonia: I wanted your thoughts on some of the big earnings that are lined up tomorrow. I will come to the heavy weights in a bit, but from the broader markets, there is something like HeidelbergCement India that comes out with its earnings tomorrow. And going by what we have seen with UltraTech Cement, the hope is quite high that some of these other companies might also do well. Do you have a buy on any of the cement stocks that have numbers? A: In fact, I gave a buy call on the cement stocks about four months back and since then the stocks have appreciated by about maybe 35-40 percent. But if you really want to know my view, I will be a bit cautious going forward because the kind of monsoon, the spread of the monsoon with the pace which we have been seeing obviously will see the Q2 offtake of the cement will be seen quite low and that may lead to the lower capacity utilisation by a couple of percentage across the board for all the cement companies. Industry has been expecting a growth of 8 percent, but that will be seen muted for Q2. So, going forward, I am not keeping a positive view because the Q1 numbers will be very good, but then the caution will come on Q2 but on a select basis. Heidelberg definitely cannot get compared with UltraTech because UltraTech is seen the most expensive and they have been posting the best results. If you see 3-4 companies who have been posting the best numbers are Shree Cement, Ramco Cements and UltraTech. And I would put these three in the best league in terms of the efficiency and in terms of the performance. But there are certain plays available like Kesoram industries having a capacity of 7.25 million tonnes. Now it is a very lean balance sheet. Just a debt of Rs 1,200 crore that too which is backed by the tyre division they have in Odisha. Similar is the case with Century Textiles with a capacity of 135 million tonnes. Again in both the cases, we are expecting some kind of corporate move seen to be happening there. So, these are few ideas and maybe if you take a call on an enterprise value (EV) to earnings before interest, taxes, depreciation and amortisation (EBITDA) basis, then Saurashtra Cement looks quite a reasonable stock even now from the current price point of view. But yes, Heidelberg, results will definitely be seen good, but I will not be riding the momentum, I will in fact use any rise or any rally in the share to exit from the stock.

Anuj: Praj Industries is up 9 percent right now. A: Let me just go to the background of this news which the government has released that use of biodiesel and use of ethanol. Now, if you really see Praj Industries, they are supplying the distillery plants and all that, but looking to them, I am just taking the next 18 months scenario where is the cane for crushing. Already the 5 percent blending quantity is not able to provide because if you see 240 crore litre, 80 crore goes for drinking, 80 crore goes for industrial uses, 80 crore litre alcohol and 80 crore goes for blending which is not even just able to meet the 5 percent blending programme. In spirit, this is a very good programme and coming on the biodiesel, I do not think there has been commercial success on a very large scale. One company, Southern Biotech which has been recently seen begging some of the orders, but even that company has been struggling for 5-6 years. So, they have not been able to ramp up. So, if the new distilleries are likely to get installed, then only you will be seeing the positive bias coming in for Praj Industries. And in fact, that is the reason, Praj Industries has moved from the distillery to the water treatment and so many other areas which are not catching up. But it has become so generic. The moment you say that ethanol blending is going to get increased, you see the Praj Industries start moving up. I do not think that any single sugar mills in the next 24 months will be thinking of setting up a new distillery because majority of them are now all integrated and they are all in house processing the molasses. So, on a reality and actually basis, I am just seeing this news as a theoretical. Even government will not be able to cross 5 percent of the blending of the ethanol on pan-India basis because we do not have that kind of production of ethanol. So on letter, I am saying that we are ramping up the mixing or the blending ethanol is okay, but we do not have that capacity and that is unlikely to happen. So, it is better that this capital is raised to 10 percent and that gets implemented in few of the select states like UP, Tamil Nadu, Maharashtra, because where the logistics also will be within the commercial economics, because you do not have to transport the ethanol produced ion these three states to the neighbouring states where the oil marketing companies can use to blend it. So, I am just taking this Praj Industries news purely as theoretical and nothing commercial benefit seen flowing to the company in my view.