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Here are fundamental trading ideas from SP Tulsian

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

August 09, 2017 / 01:25 PM IST

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

Below is the verbatim transcript of the interview.

Latha: First up I wanted to know your thoughts on SRF and on Tata Chemicals. Both broadly in the same space of chemicals and agro-chemicals, did not look good in terms of topline or margins.

A: First taking call on Tata Chemicals, I don’t have any kind of disappointment on the inorganic chemical, their soda ash business which is their core business. However, the disappointment is seen more on their other business like fertiliser and agri inputs, maybe because they are selling their urea plant in UP and probably some kind of stock write off or books cleaning starts happening.

So, both the segments have really disappointed because complex fertiliser which they are owning at Haldia has no reason not to do well. Since we do not have break-up of the urea and complex fertiliser, so, there is no reason to take a negative call on the complex fertiliser business. So, these two are disappointment. Overall numbers are looking bad.


Same thing is the case with SRF also. If you take a call, probably SRF has also given a disappointment again on the result front.

Anuj: I wanted your thoughts on how would you approach stocks like Sun Pharmaceutical and Dr Reddys where we have negative news?

A: If you recall, for the last couple of years I have been -- when Sun Pharmaceutical used to rule at Rs 1,000 and since then I remember continuously I have been giving the negative call because of the continuous decline seen on their domestic business and as well as on their global operations. We have seen their subsidiary reporting bad numbers.

I don’t think that you have positive bias on any of the pharmaceutical stocks. This I must have said umpteen number of times on the channel that I am not keeping any positive bias on any of the stocks whether you talk of Dr Reddys, Lupin, or Sun Pharmaceutical prominent amongst the larger ones I am referring to, except for maybe Aurobindo Pharma and Glenmark.

So, I continue to have the same and after the results of the US subsidiary, the things are looking in fact more damaging for Sun Pharmaceutical here.

Latha: The other big stock which is going to react to numbers today would be Jindal Steel and Power (JSPL). The market has been very charitable to other steel companies because their forward outlook seems to be very good. What is your analysis of JSPL?

A: I will not be taking a positive call as of now, unless and until you see one or two quarters earnings really seen getting ramped up. I agree that the developments are seen quite positive but that has not seen having reflected into the numbers to a great extent. So, maybe if you have a longer horizon, then I will take a call, otherwise I will keep a neutral to mild positive view on the stock.

Anuj: What is your midcap stock to watch today?

A: I am recommending Grauer and Weil. If you take the core business of the company, that is the only Indian company which is offering complete corrosion protection solutions mainly to automobiles, gem and jewellery units, white goods, defence, railways and electronic industry and which is a very critical part of all these industries. Apart from that, the company is also owning 7.5 lakh square feet Growel 101 mall at Kandivali; this is western suburb of Mumbai. 7.5 lakh square feet of that about 5 lakh square feet has already been developed on which company is earning an annual income of about Rs 32 crore from rental income from the shopping mall and gradually maybe in the next couple of years, the built up area of mall will get enhanced to 7.5 lakh square feet.

The best part is that the company is a debt free company. If you take the equity capital, about Rs 25 crore, Rs 23 crore plus and the net worth is Rs 250 crore and inspite of having developed this mall in this last 4-5 years, 5 lakh square feet, the company is debt free. What they do that every year with their cash accrual, inspite of paying 40 percent dividend or maybe about 20 percent dividend payout, they are ploughing back about Rs 40-50 crore for development of this shopping mall and eventually will have 7.5 lakh square feet.

If you take on their financial performance, the company has been showing a consistent performance. They have their other five plants, one in Vapi, Pune, Dadra, Jammu and Kashmir, and Himachal Pradesh for their various business because they have a small presence in paint business also and electroplating chemicals and all sort of things. So, if you really take a call on their financial working, topline of closer to about Rs 450 crore, I am referring for FY17, PAT of Rs 50 crore and EPS of closer to about Rs 2.20 because the share has a face value of Rs 1.

If you go by the Q1 numbers which has already been declared by the topline of Rs 120 crore, and EPS of closer to Rs 0.60, eventually FY18 will see the EPS at closer to Rs 3. So, if you take a call, share now ruling at Rs 39, ruling at a P/E multiple of 13 and if I compare it with the comparable, Phoenix Mills, which is again owning all these shopping mall is ruling at a P/E of 42. Similar is the case with Future Enterprise, though they have the retail business also, but they largely own the retail premises. Even that stock is ruling at a P/E multiple of 35-40. So, probably market has not understood the business model or may not be aware that the company owns Growel 101 mall which I said at Kandivali and that is why such a low P/E multiple of 13.

If you take a market cap also, sub Rs 900 crore and because it is a debt free company, EV works out to Rs 900 crore. So, seeing potential from the core operations, plus the net present value, plus the low P/E multiple and as I said 40 percent dividend, promoter stake is closer to about 70 percent in the company, I think the stock looks quite undervalued at Rs 39. I have given a target of Rs 47 in six months, but if you keep the stock in your portfolio, probably it can give you good returns over next three to four years as well.

For full interview, watch videos...
first published: Aug 9, 2017 09:30 am
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