In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on market and specific stocks.
Below is the verbatim transcript of the interview.
Surabhi: I know that you had a slightly optimistic view on Aurobindo Pharma, what about Sun Pharmaceutical?
A: I have been keeping negative view on Sun Pharmaceutical when it used to rule in the four digit and at that time also -- I don’t remember, when I used to come to studio about maybe 15 months back and all that, at that time it used to rule at Rs 1,000 or maybe couple of years back. Since then I have been saying that the kind of growth which we have seen and the kind of fatigue in the financials which we have seen coming in, probably at that time I did not take a negative call that it can correct to a level of Rs 600 but that was the view at that point of time that this stock is seen to be peaking out and I won’t be taking a call.
At that point of time my view was quite positive on the midcap pharmaceutical and which we have been kept giving buy call on many of the stocks at that point of time, like maybe Kopran or Bliss GVS which we still continue to do so. However, in the larger space, you are right that we have a positive view on three stocks still, Aurobindo Pharma, Glenmark Pharma, and Divis Laboratories at this point of time though we had Wockhardt also which we have been kept recommending from the levels of Rs 75 which people probably will not remember also. After that Rs 75, the stock has moved to level of Rs 2,400; I am taking this about seven to eight years back.
As of now fresh buying can be made if you want to pick the larger ones, fresh buying can be made in the four stocks those are Aurobindo Pharma, Divis Laboratories, and Glenmark Pharma and Wockhardt but again with a view of minimum one year, not for the short term. In the smaller one we have a positive view on Kopran. However, overall what Mehraboon Irani said that you may have to write off the pharmaceutical stocks, I won’t say that you have to write-off permanently from your portfolio, but you have to be very selective and you need to probably remain contended with a growth or rise of about maybe 15 percent or so on an annualised basis from these three or four stocks.
Anuj: CDSL issues was subscribe for you I remember, but 70 percent gains now, what is the call?
A: If you compare this issue, I think the right comparison will be that with the BSE. If you take a call, probably people will forget, take the case of HUDCO, the kind of hype which we have seen having created on the listing day probably the same thing will happen with CDSL. You are right, we have given a buy call at Rs 149, that the issue looks very good, but I don’t think that now much interest will really be seen in the stock maybe after a week or so, and probably it will move in a range of about maybe Rs 230-260.
If you take a valuation call on the company, Rs 8.21 was the EPS for FY17. If I take a 15 percent growth, the EPS for FY18 will be at Rs 10 and that makes the share to rule at a P/E of 26 on the current year earnings. If I knock of the cash, then it is at 20-21 times. Generally what will happen in case of depositories, Sebi will not allow them to increase the transaction charges because the moment volume and income starts increasing, they will be seeing some kind of cap. So, you don’t have the growth coming in for these companies which will not be more than 15 percent on an annualised basis on the bottomline. So, I don’t see any reason why should you give a valuation or maybe a multiple of 21 net of cash or a multiple of about 26 on the entire EPS.
As I said that EPS of Rs 8.21 for FY17 can only get enlarged to not over Rs 10. So, that is the situation going. So, I will advise that those who have got the allotment, should book the profits because what happens with the retail investors they get fancied that 70-80 percent and people have now lately started comparing everything with Avenue Supermarts (D-Mart) that the kind of run up which we have seen in D-Mart, probably will be seen get replicated in other stocks also. However, it is unlikely to happen. So, maybe my advice is that exit at a price of Rs 265-270. Look to buy again if you wish to maybe in the range of Rs 240-245.
Anuj: I just wanted to discuss one more stock which is Kesoram. The news that we got was that IndusInd Bank has sold 6 percent equity. What would explain that kind of transaction and who could be the potential buyer?
A: Let us first understand that IndusInd Bank has subscribed to the convertible warrant 18 months back and the terms of the convertible warrant were to convert 75 lakh shares into Rs 120 per share. They subscribed to Rs 180 crore at that point of time. If you see today, they have sold the share maybe at Rs 140 or so, so, they got a gain of about Rs 20 which has given them a yield of maybe 12-13 percent. Excellent financial transaction for them.
Coming on Kesoram Industries, we have been for last one week maintaining that we are going to see the big corporate move happening in the company because if I just give you two or three transaction in support, there too we were expecting this IndusInd Bank selling the shares of about 6.01 percent and that has happened today. So, now the question is that who has bought it. Obviously the promoters cannot buy the entire lot, we will get to know that in the next couple of days because if they buy the entire lot, that will trigger the open offer, more than 5 percent in one financial year. Right now they are holding sub 50 percent.
Second is that the company, to make it debt free and the massive corporate restructuring which they carried out last year, they again bought back their rayon and spun pipe division which they sold in the last year that is in the March 2016. Third corporate development which we are expecting is again the sale of the tyre division because they sold their Haridwar plant for Rs 2,200 crore to JK Tyre. Now still they are operating one Odisha tyre plant with a capacity of about Rs 30 lakh tyre per annum and people close to the management are saying that even the management is contemplating to sell that tyre division also to make it a fully cement company and they will be having a 7.5 million tonne capacity.
Lastly the corporate development which people are expecting that probably Kumar Mangalam Birla can come on the board because this is a BK Birla Group company. If you see in Century Textile and Century Enka, already Kumar Mangalam Birla is there in the BK Birla Group company also. So, if you rely on these things and if you try to believe, probably all these developments which I have said may take about couple of months or maybe three months or so. However, if those developments happen sooner or later, that will be giving a huge value accretion to the share price of Kesoram Industries. You are right that IndusInd Bank rightly so because they are not seen as a financial investor. They have rightly booked their gain and exited from the company.For full interview, watch video...