In an interview to CNBC-TV18's Anuj Singhal and Reema Tendulkar, 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.
Reema: In May, Fortis Healthcare was at levels of Rs 225. Now it is down to Rs 150. That is a very steep one-way fall that we have seen in Fortis Healthcare. Your thoughts?
A: I have been a giving a cautious to avoid call on the stock for the last one month or so when things were all seen that this is seen as a takeover candidate and about maybe a couple of weeks, there was news that probably the deal will get concluded in a very short time. I do not remember the price, but at that time, the share was ruling at Rs 210. I have said that the legal litigations, the stay by the Delhi High Court on the assets to keep unencumbered in view of the Daiichi case going on against the promoters.
I do not think that these kind of things were really warranted a buy at that point of time and in fact I have said that maybe on a comparative play, if you want to take a call, at Rs 210, the valuation then was translating into a marketing cap of closer to about Rs 9,000-10,000 crore against Apollo ruling at a market cap of about Rs 18,000-19,000 crore.
So on a comparative basis, at that time point of time was also not in favour of Fortis getting bought and now having corrected at Rs 150, I do not think that much downside is seen from here, but maybe those who want to have again a medium-term view of at least six months can look to plunge into it, but otherwise, I do not see valuation risk but I do not see much upside potential in the near-term also. So maybe the cautious view which was existing there now can be turned into a buy call with a view of about six months.
Anuj: The stock of the day today has been SREI Infrastructure Finance. Your thoughts on the stock and the huge move that we are seeing right now.
A: Difficult to say that what is the reason what has led for the stocks to rise in the double digit percentage today, but yes, under the equipment finance division and also, in fact we have been keeping the positive view on the material handling and this equipment finance kind of things and that is the reason we have been giving the buy call on Action Construction Equipment.
But apart from that, if you take a call on this SREI Infra, they have been doing quite well in the segments lately, and in fact we have initiated buy call on the stock 2-3 times in the past couple of months. So, maybe positive bias continues to remain on the stock of SREI Infra, but the reason for this double digit upsurge today is really not known.
Anuj: The other stock that is really interesting, UltraTech Cement is up 3.5 percent while ACC is actually sulking a bit in trade today. But we know ACC has rallied a lot already this month. Your thoughts on the largest one UltraTech at current levels?
A: The results are due tomorrow and I will advise better to wait for the results because unless and until you have the confidence or courage of playing ahead of the results then only one should take a call otherwise, I will advise to wait for the stock to see for the results.
Anuj: You have been positive on PSU banks. Do you think this remains a bit of an irritant and the rally can resume?
A: I think this is a table thumping judgement and if I just take a call on the proceeding further against the appeal and all that, I have read the arguments having taken place before Ahmedabad where more on the question of facts, Essar Steel has said that after March 31, 2016 the situation have improved. They have paid Rs 3,467 crore in the financial year 2017. They have been operating at 81 percent capacity. They have started making profits.
And then thereafter except for the RBI circular which was admitted by RBI before the Honourable Ahmedabad High Court of Gujarat High Court and the modification having carried out, I do not see any question of loss so I have my doubts that why even an appeal will get admitted in the Supreme Court.
I have my doubts of appeal getting admitted. Maybe because of the quantum of the case, because of the senior council will be standing for Essar Steel also, even if it is admitted, it should get dismissed in the first hearing itself that is number one because the Apex Court has been very clear that no tampering and playing with the defaults and all sort of things, number one.
Number two, coming on the steel industry, in fact I have been saying that all five NPA accounts, of the 12, five are steel accounts, all are pricey assets. And if you really see, no promoter is willing to give up the control and if they are making profits and the kind of interest which we have been seeing from the potential acquirer that is seen to be huge.
And I do not think that the things should really be expected to get reflected into the PSU banks, but I am extremely, I am highly positive on the banks like maybe State Bank of India (SBI), Punjab National Bank (PNB), who have been the lead banker, SBI has been the lead banker in three out of these five steel accounts. PNB is lead banker in two steel accounts. So I am extremely positive and probably the reflection will be seen coming in the PSU banks in the near-term itself.
And going on Bank Nifty, probably the weekly expiry because if you see the PSU banking stocks moving up that will not get reflected into the Bank Nifty unless and until ICICI Bank moves up, Axis Bank moves up, HDFC Bank moves, Kotak Mahindra Bank moves up. But I do not think the weightage or the reflection will be seen much in that.
And maybe now my next even which I will be expecting is the clearance of the Rosneft deal from PMO and if that happens, for about Rs 85,000 crore, Rs 65,000 crore will come to the lenders and I will not be surprised to see Essar Steel coming on track and maybe offering Rs 10,000-15,000 crore to settle the Essar Steel dues as well. Extremely positive. I am taking extremely positive on PSU banks. I will not be taking the minute and hourly call on the movement, but yes, the three listed steel stocks and the PSU banks are going to be on my buying list.
Reema: Quickly, your thoughts on RBL Bank, perhaps nudging out IndusInd Bank to make that acquisition of Bharat Financial Inclusion.
A: When RBL made a preferential allotment of about Rs 1,600 crore, at that time I have said that this is in that direction because we knew that two potential acquirers were there, IndusInd Bank and RBL Bank, two serious potential acquirers I am referring to I am referring to and the way, Mr Sobti in the concall of Q1 results have said that they will be sticking to their valuation only, probably was giving an indication that they will not budge higher on their valuations and probably that may not allow the deal to go through unless and until one does not know that maybe again they can come and throw their hat again in the ring.
But this seems certain or maybe looks likely that maybe RBL Bank will be because if RBL Bank is able to raise money at such a good valuation, definitely they will be looking for inorganic growth and Bharat Financial definitely fits in that category.
Anuj: What are you views on Power Grid for the long-term?
A: Power Grid is a leader in transmission and distribution (T&D) space and they are controlling more than 50 percent market and the kind of capex lined up in the T&D space aggregate of more than Rs 2 lakh crore is going to be seen quite positive for Power Grid, but let us not forget that they have huge debt also in their books closer to probably they are adding to the debt of about Rs 1 lakh crore. So since I am keeping a positive view on T&D space, it will not be wrong in holding Power Grid.
But on a relative better valuations I will probably be taking a shift in CG Power because they are also largely into the T&D space, catering to that space only making the capital goods for that sector. So on a relative basis, I think she can expect a better returns from CG Power as against Power Grid. I am not against Power Grid, but that may be a slow mover in the sector going forward.
Anuj: Thoughts on ITC?
A: I have never liked the stock. Maybe in this last couple of months after couple of weeks after having seen such a big rise on GST because you are going to see having these kind of problems, anti-tobacco lobby and all sort of things. And I do not think that maybe at the current valuations, both, whether it is for Hindustan Unilever (HUL) and ITC, in spite of having positive on fast-moving consumer goods (FMCG) and in spite of the good monsoon which sentimentally creates positive view on FMCFG sector if not specifically on ITC. So I will not be taking a buy call or maybe positive view on ITC going forward
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