Here are SP Tulsian's top trading ideas

In an interview to CNBC-TV18's Anuj Singhal and Surabhi Upadhyay, SP Tulsian ofsptulsian.com shared his views and outlook on the fundamentals of the market and specific stocks.

Below is the verbatim transcript of the interview.

Anuj: Your thoughts on Lupin and whether it is a buy for you at current level. Today there was a bit of a panic selling that we saw during the day.

A: Apart from today's selling, if you really take a call, in fact I have been giving my cautious view on all the stocks like Dr Reddys Laboratories and Lupin, except the three stocks that is Aurobindo Pharma, Glenmark Pharma and Divis Laboratories.

In fact if you see for last maybe one week or so or the institutional investors and the large investors or maybe for last couple of weeks they are seen exiting from Lupin. In fact we do not get to see these things on a real time basis. So when you have seen the change of view by this large investors, that indicates that yes, the weakness is there and that kind of quantity cannot really get absorbed.

So even I do not look to the fundamentals which as such also does not look to comforting, I will not be taking a positive call on the stock. In fact today's panic selling, it is difficult to substantiate that what could be the reason, but I have been keeping a negative view or maybe cautious view on Lupin as well.

Surabhi: Your thought son everything that we have seen in the oil and gas space today and the manner in which the oil marketing companies (OMC) reacted. There has been a bit of volatility as the market was digesting yesterday's news. But what would be your call on Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC)? Does anything change after what we heard yesterday?

A: Yesterday also we have discussed after the Reliance press conference and this morning also I have said that I am not keeping a negative view on the oil marketing companies because there is no point. If we just want to take a sentimental negative view because Reliance Industries is coming into the fuel sessions which are not seen.

In fact no clear timeline has been defined and even if one presumes that they will be more having focus on the gas and all that, it will take at least couple of years to see that picture happening on the ground and the conventional fuel, that is petrol and diesel are not going to go away for the next two decades also.

So there is no point and no meaning in taking the extreme negative view merely on the news announcements. In fact that kind of announcements that huge gas inflows will be coming in was seen from Reliance Industries in 2011 as well when BP made a substantial huge investment of Rs 32,000 crore. At that point of time, USD 7.2 billion.

So sometimes, we experts will get too negative or too pessimist on any kind of news, but maybe apart from the volatility, whether the OMCs goes up and down, but I am keeping the positive view on the OMC for a moderate kind of return. And amongst them, in fact my only pick has been the HPCL, I have not been taking a buy call on IOC and BPCL but HPCL at the current level looks a good buy.

Anuj: The stock which has surged to high point of the day is Ujjivan Financial Services. It is a stock which has gone through brutal correction and there is a big spike that you are seeing now. This is one of your favourite stocks. Do you think the worst is over for Ujjivan?

A: Indeed. Two things which you have said, yes indeed this is my favourite stock and second is the brutal correction. In fact if you see, post its inclusion in Futures and Options (F&O), stock seems that sometimes, I agree that maybe Q3 results were a big disappointment, Q4 was not such a big disappointment, but it did not meet the management commentary which we were expecting from the company to see the reversal of the provisions or the recovery.

But apart from that, still if you take these negatives, I do not think that these kind of corrections were warranted. So more you keep a stock suppressed for whatever reason because this has been going off and on in the F&O ban also. So some kind of technical pressure is seen having kept on the stock to keep it ruling at a very low level. And if you recall, in the past also, the stock shows this, you can call it as a high beta stock where swift recovery and swift correction always takes place in the stock.

So now having seen the stock having tested a bottom of Rs 300 on a fundamental value basis, you do not see much downside going from there, I am very positive and I will not be surprised to see the share immediately, maybe next couple of months showing a level of Rs 375 also because these kind of price behaviour we have seen in the past from the stock .

And as I have been keeping an extremely positive view amongst the stock, on a valuation basis also, if I compare it with any company like Satin Creditcare Network, Bharat Financial Inclusion or Ujjivan, purely the three microfinancial players, probably Ujjivan comes on the top from a fundamental point of view. So I am keeping a positive view and will not be surprised to see, as I said, in the next couple of months, a level of Rs 375 as well.

Anuj: Any thoughts on either Kajaria Ceramics or Century Textiles and Industries? Century Textiles, I know is one of your favourite stocks, but on both these stocks, how would you approach them from here on?

A: On Kajaria Ceramics, I have a constant positive view, mild positive view which is a very good stock into the tile and sanitary fittings space and can give you a return of about 15-20 percent because this stock has already moved by about Rs 200 in this last 3-4 months. Post its, maybe 3-4 months back when demonetisation happened, we had given a buy call at Rs 550 or so. So now we advise to hold it for the time being.

But coming on the Century, in fact I do not know how far those news are correct, but we are getting the news that the sale of the paper plant or paper division of the company is almost on the verge of conclusion to JK Group. And in fact, JK Group is going for a swap kind of things where JK Lakshmi Cement, I do not know whether this is all, but these are just market rumours, but the conclusion of the paper division is bound to happen and JK Group in turn is selling JK Lakshmi to Aditya Birla Group to mobilise about Rs 5,000 crore and the value of Century paper division plant is estimated at Rs 5,000 crore.

If once that happens, Century Textiles has a debt of about Rs 5,500 crore. Of that Rs 4,000 crore term loan and Rs 1,500 crore is for working capital. So Century will become debt free and then the entire amount of that Rs 5,000 crore, which I am just giving a ballpark, which they get on the paper division sale can get used to repay the Rs 4,000 crore long term debt and balance will be used for the real estate development purposes and if that happens, in fact I have been keeping a positive view on the stock.

That will change the fortune of the company and from here on, I see huge value in fact lying into Century because thereafter you are left with the real estate, you are left with cement, you are left with textile and you are left with the chemicals. So huge value will be seen into this.

Anuj: Century Textiles would become debt free, that is what you are saying?

A: Yes, because that is what I said, Rs 4,000 crore is the debt. Total debt is Rs 5,500 crore. If they sell the paper division for Rs 5,000 crore because that is possible, paper division is excellent 2.36 lakh tonne. So of that Rs 5,000 crore which they will realise, Rs 4,000 crore can get paid for discharge of the long-term debt. And then company becomes debt free and apart from that, debt free company remains with Rs  1,000 crore as a cash which can be used for the development of the real estate.

Instead of availing fresh long-term debt, the Rs 1,000 crore which they keep even after becoming debt free can get used because if you want to develop about Rs 20 lakh square feet in Worli, what you need is about Rs 1,000 crore, the total construction costs which company is planning to in fact, quickly develop Rs 20 lakh square feet in maybe next 3-4 years.

Anuj: Thoughts here, Aban Offshore of course, maybe a slightly different candidate, but we are seeing the rest of the stocks also rally. Is this a rally which would peter out soon or do you see a fresh move here?

A: I will not be taking a fundamental call on any of these support services stuff except one that is Dolphin Offshore Enterprises (I) because if you see the financials, maybe working will disappoint you because there have been many write offs of the sundry debtors receivables for the last couple of years which the company has been carrying out. But if you see their technical competence and if you see their financials even now, on a fundamental or on a valuation basis, this looks quite reasonable and quite cheap. But I will not be taking a call on other stocks like Alphageo (India) or maybe Aban Offshore because of the expensive valuations or because of the stretched balance sheets.

I am not keeping a positive view on these offshore drilling and support services whether you call of Jindal Drilling Industries or I have said Alphageo or maybe Aban Offshore. Maybe if one is a compulsory buyer, I am not recommending Dolphin offshore, but if you are a compulsory buyer in this space then look for Dolphin Offshore.

Surabhij: What are your thoughts on LIC Housing Finance?

A: Extremely positive on LIC Housing because if you see, two companies which we do not talk much. In fact we take a call, I am not saying that those stocks are bad, but the housing finance companies, sometimes we like Can Fin Homes kind of things or maybe Dewan Housing Finance Corporation or maybe Indiabulls Housing Finance, GIC Housing Finance, in fact we have initiated buy call on all. But the two housing companies which comes to the mind or which are existing for ages are HDFC and LIC Housing.

And if someone really wants to have, I always say that these are your portfolio stocks where probably you may not find the big upside of 40 percent in a year kind of things, but they are the consistent rewarding to their investors in the form of about 15 percent or so. And someone wants to have the stocks in the portfolio, it is very easy to recommend any stock for maybe 3-10 month horizon or 3-12 month horizon but it is very difficult to advise any stock with a 3-12 years horizon and I think both stocks falls in that category. So I will advise the investors to hold LIC Housing but maybe with an expectation of a consistent compounded annual growth rate (CAGR) of about 15 percent over the next 3-5 years or so.

Anuj: Just wanted a word from you on this Bank Nifty rally and whether you would want to buy any of the Bank Nifty stocks like Kotak Mahindra Bank or ICICI Bank or HDFC Bank?

A: If you see yesterday, probably last one hour was the weekly expiry management. If you see Bank Nifty for last two weeks, it has not closed below 23,300 and same thing was yesterday also. So it was clear demonstration and in fact, yesterday also I have said that I am keeping a positive view on the bank stocks and if you see the situation, definitely this Thursday, weekly Option expiry is likely to happen on a positive note which I will not be surprised to see it happening at a level of 23,700 plus also.

So if that has to happen then all the heavy weights, private sector heavy weights has to perform and participate. And two stocks comes to my mind which now can be looked into from a Monday point of view. One is Yes Bank and second is ICICI Bank. And overall, we have been keeping the positive view on these private sector index heavy weight stocks like ICICI Bank, Yes Bank, IndusInd Bank, HDFC Bank, but apart from that, we have a positive bias on the larger PSU banks as well like Punjab National Bank (PNB), State Bank of India (SBI), Bank of Baroda kind of stocks.

Anuj: Wanted your thoughts on Dwarikesh Sugar Industries.

A: Excellent stock. If you really now let me just quickly give you the background, the company posted an earnings per share (EPS) of Rs 90 for FY17. Take it from me that FY18 will be Rs 90 plus whether it comes to Rs 91 or Rs 99, difficult to tell that. And company, the board has recently gone ahead and approved the stock split from 10 to 1. So sometimes I wonder that once the stock becomes Rs 1, the effective valuation comes to a level of Rs 40.

It is very difficult to digest that a share having an EPS of closer to Rs 9 plus can rule at an EPS of Rs 40 and if you see the situation going forward in Uttar Pradesh (UP) because Dwarikesh has three sugar mills in UP with 22,500  tonnes of cane per day (TCD), the production is going to be higher than what they are. In fact they have recorded a production of 30 percent higher in this crushing season. Next year, again it is going to be better, maybe 5 percent or maybe 7 percent because UP is going to record the higher production next year as well.

So taking this into consideration, I think this is an excellent buy now at the current level. I do not see much downside from here. Stock once goes ex-split in the next one month or so with Rs 1 face value then it will be seen very cheap with an expected EPS of Rs 10 plus for FY18 with the stock ruling at Rs 40 or maybe sub-Rs 40.