Here are fundamental trading ideas from SP Tulsian

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com in which he shared his readings and outlook on market and specific stocks.

Below is the verbatim transcript of the interview.

Latha: The SBI Life price band, what did you make of it, is that subscribe?

A: Definitely the issue will evoke good response because of the renewed interest seen building on the insurance IPOs. However, if I take a valuation call, because there is only one stock available that is in the listed space, that is ICICI Prudential, and if I take price to embedded value, SBI Life is issuing shares at Rs 685 to Rs 700 band and I for all purposes for calculation have taken Rs 700 as the issue price where the book will get discovered. So price to embedded value is at 4.24x for SBI Life, while ICICI Prudential is ruling at 3.8x if I take at the current market price of Rs 432.

Even if I presume that SBI Life will list at maybe Rs 750, that will translate into price to embedded value of 4.55x. So, definitely if you take a comparative call with ICICI Prudential, then definitely SBI Life is looking quite expensive. As I said, on the current valuations it is better to go and buy ICICI Prudential which is available at 3.8x price to embedded value. However, issue is going to get good response because as I said that insurance and maybe because of the good parentage and all that.

However, on a comparative basis because suppose if I have been given choice, rather I will instead of applying in SBI Life, I will be rather be going and buying ICICI Prudential from the secondary market because if you apply the same 4.55x embedded value presuming that SBI Life will list at maybe Rs 750, then you have a good scope of ICICI Prudential even rising to a level of Rs 505 -- at exactly at 4.55x the ICICI Prudential price will come to around Rs 512. So, it is better to buy ICICI Prudential at Rs 432 instead of making application in SBI Life. However, yes, SBI Life will be because generally we have seen now primary market issues are seen priced quite aggressively and that may be the case because of the revival of interest in the insurance sector.

Latha: Generally Future Retail, Future Lifestyle, and Future Consumer have all been pretty excited and Future Consumer we have seen a huge rally. What is your opinion on this entire group and the individual stocks?

A: We have given in fact buy call on all three stocks. I won’t say that Future Lifestyle was on our radar but Future Retail, Future Consumer, and Future Enterprise. In fact we have been giving buy call since start of the listing of Avenue Supermart (D-Mart) and since then in fact if you see, Future Retail has risen by more than 100 percent, same thing is the case with Future Consumer, and Future Enterprise. So going forward, now my pecking order probably will be Future Enterprise, Future Consumer.

Probably I will take a halt and won’t hesitate to take a profit booking on Future Retail because maybe D-Mart because ultimately the Future Retail is driving in-line with D-Mart and probably D-Mart also will take a pause for next couple of months or maybe till next results which we will be seeing from the company. So, taking all this into consideration, probably my pick at this point of time will be Future Enterprise but if someone compels me to buy another Future Group, then I will go with Future Consumer. So pecking order is Future Enterprise, Future Consumer, and I will take a profit booking call on Future Retail.

Latha: What is your big stock bet for the morning?

A: Today's call is Grauer & Weil. If you see, we have just now discussed about Future Enterprise, so this company owns Growel 101 mall at Kandivali West. It has an area of about 7.5 lakh square feet and that mall is doing quite well. We have in fact seen on Monday also my theme was of Cineline India because again company owning the mall at Nagpur. The kind of news buzz which is going on that Future Group is looking to acquire many of the shopping mall and consolidate again because of the brick and mortar business seen really picking up, so, this is the main area.

If you see the financial performance, looking to the first quarter numbers of this company, Q1 EPS has been closer to about Rs 0.60. It is an Rs 1 face value stock so maybe company should be able to post an EPS of closer to about Rs 2.50-3. So, even on a fundamental basis the stock is ruling at a P/E multiple of 15. The company is entirely debt free, so, the entire whole Growel 101 mall has been developed by the company without availing any debt.

Coming on the core operations of the company, they are the only Indian company and few in the world offering complete corrosion protection solutions. If you see the kind of sectors they are catering to, is the automobile, hardware, electronics, white goods, jewellery, railway, and defence where the corrosion and corrosion resistance and protection is very much required. As I said, this is the only company in India and they have five plants – Vapi, Pune, Jammu Kashmir, Himachal Pradesh, and Dadra. Their core business is also doing quite well. If you take their annual income of about closer to Rs 500 crore because rental forms a very low portion of that. So, main turnover of more than Rs 400 crore comes from the core operations.

So taking all this into consideration, if you take market cap of about Rs 1,100 crore, enterprise value is also at Rs 1,100 crore because there is no debt element with the company, so, taking these assets of the shopping mall, and the core business along with 69 percent promoter stake in the company is looking quite good. In fact I have recommended this stock on August 9 in the same show in the morning at Rs 39. Stock has already given a gain of about 25 percent in five weeks. However, we still see a lot of potential to rise from here and that is renewed call. Share now ruling at Rs 49 can move to a level of Rs 59 in next six months or so.

For full interview, watch video...