In an interview to CNBC-TV18's Anuj Singhal and Surabhi Upadhyay, SP Tulsian of sptulsian.com shared his views on the fundamentals of the market and specific stocks.
Below is the verbatim transcript of the interview.
Anuj: I want your thoughts on Voltas first because that is the stock that we are discussing. Do you think this is a buying opportunity or after having seen the stock go through a vertical rally, you would want to see for a more cool off?
A: I will not be taking a buy call because firstly if you take the view till June 30, in fact the destocking is happening even at the items like food grains, sugar and all that so definitely things are seen happening at the consumer durables level also. And actually about a couple of weeks back I have said that after June 30 when monsoon reached pan-India even to the part of Delhi, Punjab and all that, by maybe end of June or first week of July, we see the demand for ACs getting tapered off and this is the typical stock price pattern for Voltas that you always see the share peaking out in the end of May and from thereafter, it starts correcting with a weak bias seen in the month of November, December when the peak winter starts happening.
So obviously, there is no logic for the dual reason. One of the destocking which is likely to continue till June 30 and in fact when we have been hearing this pain of GST, actually that pain is not seen after its implementation because by June 30, the destocking will happen and there will be a huge slew of orders coming into the manufacturer from first week of July. But that may not happen with Voltas. So a couple of weeks back also I have said when the stock has moved to a level of Rs 500 plus that this is a time to book profits and look for other ideas, there is no point in remaining invested because of the summer season coming to an end by middle of June and this destocking problem happening now.
Anuj: For Bank Nifty of course, we have had a breakout, on the Nifty, what is your call?
A: We have discussed on Friday and the kind of consolidation which we have seen for the last two weeks and I have been keeping my positive stance on the June series in the last two weeks because firstly I will attribute the reason which I do not know why it has not been discussed at length, 26 percent increase in the income tax collection. If you have seen that, that means the advance tax numbers which was the first instalment, that has seen really quite good. More than Rs 1 lakh crore having come in and as I said, 26 percent growth. So that was giving an indication that what kind of FY18 earnings growth will be seen in all the across the board.
If you have even the personal income tax increasing by, I do not have the breakup of the corporate and non-corporate income tax, but even if you see any kind of increase happening in the personal income tax, that has to be lead by the growth in the corporates only because in the form of salary, in the form of incentives and all those coming in. so that is one factor, number one.
Number two, if you see the consolidation having happened in the market, on Friday I have said that very clearly that Bank Nifty in this last 13 trading sessions has not closed below 23,300 and Nifty Future has not closed below 9,600 barring maybe 10 points here and there on Friday having closed at 9,590. So that shows that there was no weakness at all in the market. The strong undercurrent and the strong hands which have been holding on this market, but the reason for today's rally, I will attribute to the strong income tax collection of 26 percent which we have seen which was not much discussed in the media as of now.
Surabhi: Do you track any of these companies - Zuari Agro Chemicals, Phillips Carbon Black, Deepak Nitrite? Any thoughts on any of these stocks?
A: All are having its own play. Firstly for Deepak Nitrite, I do not think that there is any kind of because they are not into the fertiliser, their major portion comes from the non-fertiliser business. Coming on Zuari again, I am not keeping a positive view in spite of the monsoon and generally the fertiliser stocks seen moving up.
Phillips Carbon Black again has to go with the story of the tyre, the kind of growth, because carbon black is used by the tyre industry. So I am keeping the tyre ancillaries also on a positive mood as we have in fact been giving buy call on Phillips Carbon, Aditya Birla Nuvo which are also into the carbon black or maybe like Rajratan Global Wire which are into the bead wire providing for the tyres and all that. So that has to do with the linkage of the tyre growth which we have been seeing reflecting into Phillips Carbon Black.
Anuj: What is your view on Amtek Auto? If it gets restructure, will you receive holdings in new company or should you sell it?
A: There are two views. Firstly, if you take the situation prevailing on the ground, this bankruptcy, 12 notices and all that and the kind of fear and confusion which has been created, probably everyone will take a negative call. But let me just quickly present here, I am taking of the group, I am not taking of Amtek Auto because they have 3-4 subsidiaries also, Castex Technologies, Metalyst Forgings and if you take the combined turnover of all these companies of Rs 15,000 crore of auto ancillary.
And if you take the present market cap of all these companies, it is less than Rs 1,200 crore. Maybe I am taking the market cap as of now. And even if you take the debt of Rs 17,000-18,000 crore which is due to the this one and expect that 30-40 percent haircut will come and maybe banks will settle for Rs 12,000 crore, that means you are getting the turnover at 1:1 ratio. That means enterprise value (EV) to turnover and if you just see the client list, there is not a single auto maker which are not the clients of Amtek Auto. I am not referring that, I am not trying to present the picture of a fundamental that the things are looking very good. The companies are very strong.
But there will be potential buyers and this is what I have been repeatedly maintaining that the 12 accounts which have been picked up by the RBI or maybe by the banks and all that are those accounts where you have the potential acquirer where a lot of interest of acquisition is being shown by them and maybe I would say that I would not be hesitating in using some harsh words that these promoters are not willing to, in fact they are dishonest promoters who are not willing to pay in spite of having the huge value seen lying in the plants and assets owned by those companies.
So yes, now they will come on table, they will definitely, I do not think that proceedings will get concluded by the insolvency court. Much prior to that, things will get resolved whether it happens with the same promoter or with new promoter, it is difficult to say. So I will advise all the shareholders, those who have been holding Amtek Auto, Castek, Metalyst and all that, just keep cool. Do not look to the share price daily.
If you can hold your nerves, if you keep on seeing daily and the kind of shouting which we see from many of the experts and all that, it will become zero, they are a zero company and all that and equity value will be zero, I am not buying that argument, at least in respect to these few of these assets.
So hold that. Do not make fresh buying, but hold them and wait for the outcome which may take about 3-4 months time probably you may see a share bouncing back by 100 percent also from the current level. I will not be surprised on that purely on the asset value and purely on the assets which these companies are owning.
Anuj: I wanted your thoughts on Coal India. Fundamentally, things have not improved, but at these levels, for a one-year horizon view, you think it is a good enough investment or would you also stay clear of this?
A: If you take the situation, there is lower offtake of coal happening, number one. Number two, practically if you take a call on the power generating stocks, steel and all that, everyone has got coal linkages. So obviously the demand which used to come from all these sectors, things are not coming to Coal India. Number three, if you see the power capacity additions which is happening in the renewable energy to the extent of about 7,000 megawatt per year happening in the solar and all that, that means that much less capacity addition is happening in the thermal which consumes coal.
So taking all this into account from all the sides, I do not think that there is any kind of growth. In fact it is the degrowth which will be seen largely because of the no offtake to be seen from the steel and the captive power consumers as well as from the thermal power plants also. So there is no point in remaining invested in Coal India because of the degrowth which we have been seeing in their financial performance and quantity offtake.
Anuj: I wanted a word on Dish TV India. Till last year, it was a stock that everyone wanted to buy. Rs 105-110 was its highs. Now it has corrected to Rs 77. What is going wrong here and as a fundamental analyst, would you recommend this stock at current levels?
A: Two things. First the leveraging of the balance sheet by acquiring Videocon D2H, number one. Number two, the kind of degrowth because of the market, you have said that about a year back, people were seen very bullish because at that time, people were not expecting the Reliance Jio who will be taking a larger share of cake and this direct to home business has become really very risky and very capital intensive. So I do not think that for these two reasons, you have any kind of investment worthy outlook seen on the Dish TV going forward.
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