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Here are SP Tulsian's top trading ideas

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

July 13, 2017 / 04:56 PM IST

In an interview to CNBC-TV18's Anuj Singhal and Surabhi Upadhyay, SP Tulsian of sptulsian.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 Sintex Industries and if the move is getting overdone? Between yesterday and today, we have seen a huge move.

A: That is right. Even today, it is up by about 14-15 percent and definitely this is just a momentum play because if you take a call on the textile space, you have umpteen number of stocks available and it is very essential to see the numbers after the restructuring because generally what happens when you have the restructuring prior to that, sometimes they overlap between the segments also the profits seen moving between one segment to another segment.

But taking pure valuation call, pure fundamental call, I do not think that these kind of valuations are really warranted because textile stocks are not having a very rich kind of price-earnings ratio (P/E) application. They are all ruling at a very low valuation. I am not referring enterprise value (EV) to earnings before interest, taxes, depreciation and amortisation (EBITDA) which is of closer to about 10 for this company but I am referring to the P/E multiple which is seen quite low for many of the companies, maybe in the single digits. But you need to understand the growth prospects going forward and that is very important.

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So unless and until we get to see the results, we are in fact keeping positive view on the plastic division, the share which is yet to get listed. But at the current valuations, the share is definitely of the Sintex, this textile play now which is traded and which is seeing the momentum, we will remain away from the stock.

Anuj: AU Small Finance Bank, I do not know what is happening here. This is a bit of a scarcity premium or something that we have seen, but is there a risk of a brutal correction here because of the way the valuations have just gone out of toss?

A: Even if I will not be taking an extreme view that there will be a brutal correction, but yes on a fundamental basis and in fact all these data points while analysing our issue, we have given a comparative table of all these eight companies where we have given net interest margins (NIM), we have given the loan book and all sort of things.

And even if you see the NIM, I have seen people talking that they are not into the microfinance business, but ultimately now they are into the small finance bank and you have said that the market cap of AU Bank is equal to or maybe more than Ujjivan Financial Services and Equitas Holdings put together, but it is the market cap of AU Finance is now two Equitas and two Ujjivan put together. That means the market cap of both the companies, Equitas and Ujjivan is Rs 10,000 crore and AU is Rs 20,000 crore.

So I do not think and even if you take the NIM because that is the efficiency and that is the barometer. One can also add to the valuations in case of Ujjivan and Equitas, in both the cases, the NIM is anywhere between 11-13 percent while in case of AU Bank it is sub-10 percent. So I do not understand the logic and in fact you cannot compare the Bajaj Finance. Bajaj Finance is just numero uno in the NBFC space and actually, if today, maybe they have crossed the landmark of exceeding the Bajaj Auto market cap also.

In fact this is what we have apprehended and we have projected in the month of April that probably in the year 2017, Bajaj Finance will exceeded Bajaj Auto. So you cannot compare these companies with the company like Shriram City Union Finance or Bajaj Finance which have a loan book of anywhere between Rs 50,000 crore and Rs 80,000 crore. So definitely these are all momentum. It is difficult to say that how long this strength or maybe the momentum, I will not call it that how long it will really continue and sustain. But at some point even those who have been holding the prices will go for profit booking.

And it remains us of the olden days when the people have always been bullish on the rising stocks and the kind of corrections which we have seen. So difficult to take a call whether it will be a brutal correction will be seen or not, but definitely extremely expensive valuations and I do not give any logic for these valuations because as I said on the branch parameter, NIM, with two comparable peer, I do not think that these kind of valuations are justified.

Anuj: Do you track Rallis India? Is it a stock that you would recommend holding on to?

A: Actually the query, the way he has said that he has been holding it for three years and now he is seeing the cost or virtually seen to having come to the cost. Actually if you see, I am extremely positive on the agro chemical space and Rallis, they are into the agro chemical space, but the stock which we like most is UPL because if you see the global presence and after having Advanta having merged with UPL, I in fact keeping an extremely positive view on UPL.

I am not saying that Rallis is a bad stock. One can compare Rallis with Tata Global Beverage where the performance is not seen having reflected into the price. Maybe on a P/E multiple if you take a call, PI Industries, Dhanuka Agritech and Rallis India, they may all find at the same level. But if this person or this investor is prepared to take a shift from Rallis to UPL, that will be a logical move.

Surabhi: Any thoughts on this recent listing? Would you recommend any sort of a buy on Eris Lifesciences?

A: At the time of IPO, we gave a buy all because for the simple reason that the kind of growth which we have seen in FY17 for the company on topline, they grew by 30 percent but on bottomline, they grew by 70 percent, number one. Number two, they do not have any kind of global presence. It is a pure 100 percent domestic company, they only cater to the Indian market and they do not have any exposure to US or no apprehensions, no concerns or no worry for the US FDA kind of things.

So we have been keeping a positive buy and actually at the time of IPO, we gave a buy call. So we continue to have the same view of buy call on the stock because of the growth which we will be expecting to see from the company in FY18 as well on the bottomline which I think will not be less than 30 percent. So taking that into account, the buy call is maintained on the stock.

Anuj: Your thoughts on Cadila Healthcare as a stock?

A: Actually we have been keeping a neutral stance on all the pharmaceutical stocks and I have said in the past also that except for three stocks, I am not saying that we have a negative view on Cadila, but looking to the valuations and all other parameters, I do not think that this justifies a buy because we have only been giving a buy call on three stocks that is Aurobindo Pharma, Glenmark Pharma and Divis Laboratories. So probably, Cadila may not remain on our buying recommendation.
first published: Jul 13, 2017 04:26 pm
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