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Last Updated : Jul 18, 2017 05:58 PM IST | Source: CNBC-TV18

Here are SP Tulsian's top trading ideas

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

In an interview to CNBC-TV18's Anuj Singhal, 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.

Q: You have never liked cigarette stocks, that has been your stated position. But everything is good at a price. For ITC, has that price come with the derating or do you expect more?

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A: Maybe I have not liked the cigarette stocks because of the culture and because of the valuation also because first let me come on the valuation. Let me justify it is not that I have not recommended the brewery stocks in the past. In fact United Spirits was recommended by me at Rs 400. But anyway if you take a call on ITC, see the price behaviour. If I am not mistaken, on July 3, the stock was 10 percent up. On July 10, the stock was 8-10 percent up. Today it is 13 percent down. Can you call it a portfolio stock?

In fact this has become a high-beta stock like any midcap or smallcap kind of stocks. This is not the maturity where the financial investors or maybe the Foreign Institutional Investors (FII), Domestic Institutional Investors (DII) are all seen holding the stock. In fact this has created, this is creating a volatility. I fully agree with Mehraboon who has said that the buying will come at Rs 275. 100 percent the buying will come at Rs 275. Again, the things will move at Rs 300 on the pretext that the company is raising the product prices. You take it from me.

But point is that can you really take a call or can you catch the bottom and can you catch the top? Exactly six trading days back, it was Rs 367 and today, it is Rs 277 or maybe Rs 282. I do not think that these kind of stocks really warrants for the traders or for the small investors. Come on the volatility, this volatility will keep happening because ITC maybe there are few other stocks also in the frontline space, the things will keep showing this kind of irrational price behaviour and again, as I said that you are going to see the price of Rs 300, the movement maybe in the next 48 hours, I will not be surprised or maximum within this week, the announcement will come that the company has raised the product prices and this will offset any kind of impact and all sort of things.

So I do not think that apart from the culture analysis there is any fundamental reason also to take a call on ITC at a level beyond Rs 300. As I said that maybe Rs 275 qualifies a buy if you are a compulsive buyer in the stock or a compulsive trader, take a positional call and then look to exit again at Rs 300 so as to look to enter again at the lower level.

Q: Thoughts on Bharat Heavy Electricals (BHEL)?

A: Actually the situation which has taken a dramatic turn in this last one year, if you take the leadership position of BHEL as the turbine boiler and generator (TBG) space, they are the market leader. They always had an order book of Rs 1 lakh crore. But if you have so many thermal power plants which are brand new having created in this last five years, if they are all available for sale, I do not know, forget about the new order. Definitely, whatever capacity additions, in fact in FY17. We have seen a capacity addition of closer to about 15,000 megawatt or maybe 1.15 gigawatt in the FY17 equally divided between solar and wind.

But that kind of capacity addition has not been seen in case of thermal where BHEL does not have any kind of space and so many plants available. Take the two plants, one of Tata Power at Mundra and second is of Adani Power again at Mundra 4,600 megawatts. If you have these kind of plants available brand new on the thermal front, I do not know whether really the new capacity additions will really be coming in or not. And coming in on just the old plant replacement in which NTPC will be seen as a customer for BHEL having 40,000-50,000 megawatt of thermal power capacity, they can only and I do not think that that will really be enough.

So taking the dramatic turn which has happened with the existing promoters willing to exit from the thermal power plant with a capacity of about 15,000 megawatt, I have not added the capacity of GMR Infrastructure, GVK Power & Infrastructure and so many other Lanco Infratech, available for sale in the thermal power. Definitely the situation is looking a little grim for BHEL and I do not see any kind of upside potential seen going forward at least for the next 12-24 months.

Q: Thoughts on UltraTech Cement's numbers? Numbers were good, but the stock has of course rallied as well. How would you approach the stock now?

A: I am actually impressed with both the numbers, ACC and UltraTech, but more impressed with ACC for the simple reason that you need to take a call because UltraTech is already the best. I do not think that you can really expect except if you really want the company to show higher earnings, that can only come from the volume growth and not from the margin expansion and that is what is seen happening with the UltraTech. But having the Jaiprakash Associates Group of 21 million capacity having completed on June 29 and the capacity eventual capacity having gone to 93 million tonne, the things will start seen getting reflected into the results from Q2, Q3 and Q4. If not in Q2 because of the dull monsoon from thereon.

But actually I am keeping an eye on the companies which can show excellent margin expansion what we have seen in case of ACC and those kind of things can be seen in the companies like Century Textiles, India Cements, Kesoram Industries or maybe a company like JK Lakshmi Cement, J. K. Cement, these are the companies where the margin expansion because extremely back to back two excellent numbers. I do not think that even one can have a complaint from, forget the profit booking because UltraTech has risen by around Rs 300 in this last maybe couple of weeks. Obviously we are bound to see the profit booking because generally ahead after the monsoon you always have a little low perception on the cement stocks, but I am impressed with both the numbers.

But as I said that you need to look for the margin expansion going forward. The companies which can really demonstrate that. And that is what we will be seeing reflecting in the laggards or maybe on the margin fronts, companies and laggards but having a reasonable capacity of anywhere between 7-15 million tonnes. So one has to keep an eye on that and I am keeping the positive stance on cement sector.

Q: You have had a positive view on MOIL. A purchase price of Rs 311, what should be the call here?

A: Yes, I have a positive view, but one advise to this viewer that one should not always be greedy and must keep on booking profits. But coming specifically on MOIL, if you really see the situation having, I am in fact positive on the steel sector and if you are positive on steel sector, you ought to be positive on the iron ore, manganese ore, ferro alloys, ferro chrome or maybe the refractory kind of stocks which are catering to the steel industry. The kind of capacity utilisation which we have seen happening.

In fact Essar Steel, Ahmedabad High Court, litigation has given us all the financials of Essar Steel which otherwise would not have been available because of the company being a not listed now. So I am keeping positive view. In fact Indian Metals & Ferro Alloys (IMFA), yesterday have declared their numbers. That is not purely into the ferrous space, but excellent numbers. Again earnings per share (EPS) of closer to about Rs 35-36 for Q1. I am keeping a positive stance.

I do not think that now that viewer has to regret again, but I am keeping the positive view that even MOIL, Sandur Manganese and Iron Ores, NMDC, IMFA, all are in fact on my buy list and I advise him to remain invested and look for a target of Rs 375-400 whenever he gets that price, he should look to book profit as well at that point of time.

Q: You have a positive view on Jaypee Infratech of all the Jaypee Group stocks.

A: Yes, in fact I maintain that because if you take a standalone company of Jaypee Group, probably Jaype Infra is the only standalone company having 165 km Yamuna Expressway and apart from that, they are holding 1,200 acres in Aligarh and 1,200 acres in Agra which has been not explored. They had three parcels again at Greater Noida, Gautam Budh Nagar, but I do not know how much that has been developed and exploited.

So in case of when you are talking of affordable housing, these two parcels can really be very pricey. That is at Aligarh as well as in Agra. And if you see the loan of Rs 7,000-7,500 crore, honestly, I am still expecting, in fact if you have seen the restructuring or monetisation having happened in Jaiprakash Associates and Jaiprakash Power Ventures, but we have not talked of any kind of monetisation because it is a standalone company with a very long concession agreement of 35-36 years for that Yamuna Expressway. You generally see that concession agreement of 20-25 years in case of other road projects.

So I think that once we get to see because I have not seen any promoters who has been so honest and taking initiative in paying off the debt of the company. I heard Manoj Gaur on the channel and really kudos to them that at least they have gone in trouble, but they have been very honest, they did not ask for, they did not litigate the lenders. So probably I will not be surprised to see a new promoter coming in. my only thesis is that if you have the value in the project and if the potential acquirer can come in into that company, the fortunes of that company can get changed.

So I have my positive views in spite of Jaypee Infra also having doubled, as Mehraboon has said for Jaiprakash Associates having doubled, Jaypee Infra has also doubled from Rs 9 to Rs 19 in this last maybe three or four months when we initiated a buy call  at Rs 9 about 6-8 months back. But still I have my positive view on Jaypee Infra if I need to pick and choose any one company from Jaypee Group.
First Published on Jul 18, 2017 04:16 pm
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