Moneycontrol
Last Updated : Jan 17, 2018 09:53 AM IST | Source: CNBC-TV18

Here are some fundamental views on the market from SP Tulsian

Watch the interview of SP Tulsian of sptulsian.com with Latha Venkatesh, Anuj Singhal, and Sonia Shenoy of CNBC-TV18, where he shared his readings and outlook on the fundamentals of the market, and specific stocks and sectors.

CNBC TV18 @moneycontrolcom

Watch the interview of SP Tulsian of sptulsian.com with Latha Venkatesh, Anuj Singhal, and Sonia Shenoy of CNBC-TV18, where he shared his readings and outlook on the fundamentals of the market, and specific stocks and sectors.

Below is the verbatim transcript of the interview.

Sonia: It is a big day of earnings, not just the frontliners, but a lot of the non-index largecaps coming out with numbers, Adani Power, DCB Bank, Jubilant Lifescience, Mindtree. I wanted your thoughts the Adani Group stocks and something like Adani Power, what is the expectation this time around and how are you positioned here?

A: I don’t think that anything can be expected from Adani Power. The same kind of performance will be seen from the company, the negative or dull kind of performance. However, yes, keeping an eye on Adani Transmission also, though Adani Transmission is more seen on the growth path which may not get reflected into the Q3 numbers, but being the largest player in the private sector, in the transmission and distribution (T&D) space, those numbers will be seen relevant. So, keeping a neutral view on Adani Power, but Adani Transmission looks very good.

Coming on the other numbers, maybe the non-index one – amongst the index one, yes, we have Hindustan Unilever (HUL), Zee Entertainment, or maybe Bharti Infratel, I am keeping an eye on Bharti Infratel. Even if it is posting flattish kind of performance, the outlook is seen to be quite good going forward because Q2 numbers have by and large been seen quite good. In fact stock has not moved in this last maybe one month or so. So one has to really see the price behaviour also of a particular stock having taken place in this last one month vis-à-vis the Q3 numbers. If the Q2 numbers were seen to be good, I don’t think that even flattish kind of numbers from Bharti Infratel on Q3 will disappoint.

Coming on the other three numbers, maybe Sterlite Technologies, Tata Sponge, and Thirumalai Chemicals, three numbers will again be looking quite exciting where the positive expectations are seen building up and company probably all three are likely to please on that account also. One could be Gloster amongst the jute space; that result also needs to be kept an eye on. So these are the four or five non-F&O kind of stocks where I will be keenly watching the numbers today.

Anuj: The stock of the last two days has been GNFC. We saw on Monday that big rally after that Toluene Di-Isocynate (TDI) price increase, but yesterday after that intimation to the exchanges that they had to shut down that plant because of that leakage, it was down 10 percent. Do you think this weakness is giving a re-entry opportunity?

A: Day before when you talked to me about TDI price increase, I said that -- though the gas leak was unfortunate yesterday and I don’t think that that will be having a long lasting impact, maybe near term it will get resolved, but I said that day before also that I don’t see the exuberance justified. For TDI you have crude as a raw material, and that is just a pass-through, whatever increase has been and I said on that day also, day before whether it will be margin accretive, I have my doubts.

The kind of run up and exuberance which we have been seeing, in fact with start of the new year though I have been keeping the positive bias on the overall market, but many of these midcap and smallcap now definitely needs a caution because the kind of exuberance and the kind of volatility which we are seeing in these stocks, they may again bounce back to the old levels. However, once they correct by 10-15 percent, I don’t think that that is any weak heart or maybe any retail investors is able to hold them.

Coming specifically on GNFC, maybe I will wait for a couple of days, allow the stock to correct further or maybe settle it down. I am keeping a – because on that day also I said that probably we are more bullish on GSFC rather than GNFC at the current valuation and same view is maintained as of now.

Latha: We are of course getting two FMCG companies, the huge one HUL, and Jyothy Laboratories, the smaller one, will these guys interest you at all?

A: No, both of them will not be exciting me because if you really take the case of HUL, even if the performance is seen to be good, definitely on year-on-year (YoY) they will be seen much better. If you see the valuations also, the kind of valuation run up which we have seen into the stock and coming on Jyothy, I will not be because the kind of run up again has been seen in the stock price and the kind of situation going forward. Unless and until you see the results, I will not be taking a buy call on both.

Sonia: What about Federal Bank, the kind of fall that we saw yesterday, we have seen this in the past and we discussed it as well, the last time the stock fell so much it was a great buying opportunity, do you see the same this time?

A: Yesterday in fact I repeated the same view in the afternoon. I said that in fact at Rs 104-105 I see that as a buying opportunity because I have said that maybe if you want to see two or three positives, in fact I would say that the credit growth of 22 percent and maybe the marginal increase in the asset quality by about 3-4 basis points on gross non-performing assets (GNPA) and net non-performing assets (NNPA), I don’t think that those are matter of concern. So actually it is the retail banking which has been seen a big kicker, in fact treasury, there has been a reduction of about Rs 50 crore profit on a sequential basis on treasury and that has in fact led to the overall impact on the profits or maybe operating profits as well.

However, I am quite excited with the kind of valuations now we see for the stock, price to book of closer to 2 or maybe less than 2 with a flattish kind of performance. I will not be too disappointed because credit growth is seen to be quite good and though management has cautioned that next couple of quarters could be flattish or maybe little slippages will see getting increase, but I am not because ultimately that has largely got factored in into the price. When the stock corrected to a level of about Rs 80 or Rs 75 I remember maybe about six to eight months back, at that time also we gave a buy call that yes this is a time to enter into the stock. So maybe at Rs 100-104, the stock looks a good buy with a view of about six months or so.

Anuj: Your long term stock bet, Sandur Manganese, you have recommended in the past has done well, do you think it is still upside left?

A: I first gave a buy call on September 21st at Rs 890 and if you see price now about Rs 1,390. That means in a period of about 4 months the stock has given a gain of about 56 percent, and still obviously today I am recommending it again. It has a good potential, for the simple reason if I just quickly give here the company is producing about 1.2 million tonne of iron ore per annum which is the cap having set by the empowered group of committee appointed by the Supreme Court and now the Supreme Court has increased the limit of Karnataka from 30 million to 35 million tonne.

We are expecting that this 1.2 million tonne 11.5 lakh tonne per annum which is produced by the company will get raised by the empowered committee to 16 lakh tonne or maybe 1.6 million tonne for which the company was initially entitled to in 2013 also. If you see the reserve company is holding 75 million tonnes of iron ore reserve and 8 million tonne of manganese ore. If you see the price pattern in fact both NMDC and MOIL both have raised the prices of iron ore and manganese ore and that will be seen quite advantageous.

If I quickly go by the financial performance of the company for FY17 they had posted and earning per share (EPS) of Rs 57 and for H1 of FY18 already the company has posted an EPS of Rs 51 plus, that means Rs 21 EPS was posted in Q1, Rs 30 in Q2 which is always seasonally the weak quarter because of the monsoon and all that. So, maybe FY18 will end up with an EPS of closer to what Rs 115 which translate into a PE multiple of about Rs 12 on a historic earnings. But going forward on FY18 seeing the price trajectory we are extremely positive on the ferrous metals stocks going forward and this being be the natural resources catering to that sector.

We are keeping a positive view and expecting EPS of about maybe Rs 125 -130 for FY19. If you really take a call of closer to huge reserve debt free company, very good promoter stake of 72 percent plus, cash and cash equivalent of about Rs 300 crore that is about Rs 250 per share taking all this into account share now ruling at Rs 1,390 can move to a level of Rs 1,670 in next six months or so.
First Published on Jan 17, 2018 09:53 am
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