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.
Surabhi: The question is where do you make more money over the next six months odd. Are you going to make more money by buying Bajaj Auto right now or maybe by loading up a bit more of Eicher Motors or Maruti Suzuki India for that matter, that is the question for an investor. What is your view?
A: I will rather agree with Prakash's view and even I have the view. Actually if you see we have been very bullish on TVS Motor Company for about six months or so or maybe one year. And the kind of share price growth which we have seen in TVS Motors is probably the highest. But looking to the present situation, firstly, if you take a call on the results, I am not so much disappointed because the operating profit of Rs 1,300 crore plus, against closer to Rs 1,400 on a year-on-year basis is not a disappointment because we all knew that because of this GST and all that, the issues were there in the month of June.
Now, coming specifically on Dominar and the management commentary that from Q3, definitely, they can give a dent to Royal Enfield. And in fact, in the case of Royal Enfield, Eicher Motors, the problem is capacity stagnation and I do not know how that is going to get tackled in FY18, not worried for FY19, but FY18 that will be seen. So if you want to have a proxy play, want to have a shift, in fact I have been keeping now my positive view on Hero Motocorp and Bajaj Auto and will not hesitate in advising profit booking in TVS Motor which Prakash has also advised.
So overall keeping a positive view on Bajaj Auto looking to the management commentary and expecting that yes, maybe you have a pain for one more quarter in Q2. But I will not call it as pain but maybe stagnation but maybe things should start picking up Q3 onwards. So yes, keeping positive view and pecking order could be Bajaj Auto, Hero Moto and TVS Motor, now going forward from here.
Anuj: You have been tracking this sugarcane story and you alerted me about the possibility of this happening. What happens to Uttar Pradesh based sugar companies if this proposal actually goes through?
A: Let us first understand that state advised price (SAP) is only now used in two states that is Tamil Nadu and Uttar Pradesh and in fact this SAP is seen to be a big deterrent. As Mr Abinash Verma has said that whenever you see these exorbitant, I am not referring the Tamil Nadu because Tamil Nadu has a production of about 7-8 lakh tonne per year while UP, this year had a production of 86 lakh tonne per year, Maharashtra had a production of 42 lakh per year. So Tamil Nadu is very insignificant. Maharashtra which is the second largest producer does not follow SAP, Karnataka does not follow SAP.
So whenever we had this kind of political move ahead of elections and all that or maybe to appease the farmers, the politicians have fixed a very high price, number one. Number two, SAP is the prerogative or the supreme within the power of the state and that power has been upheld by the division branch of Supreme Court. So no centre can even interfere. But come on UP because now you have the BJP government at the centre or maybe NDA government at the centre led by BJP and you have BJP government in UP.
So if this happens, if this move is initiated because take the situation going forward, as I said that UP is the largest sugar producer state in the country for the first time surpassing Maharashtra. For the coming season they will remain the highest sugar producing state in the country with an estimated production of about Rs 96 lakh tonne for the coming season I am referring against 72 lakh tonne expected for Maharashtra for the coming season.
Probably, I do not know, for the next year thereafter, maybe after two years down the line, probably they may be neck to neck with Maharashtra or may continue to be the top producer. So in this situation, if you have the freedom given to the sugar mills, because sugar mills have always been reasonable. But if you have the exorbitant SAP having fixed, that was seen a death knell for the sugar industry which in the past we have seen that kind of things, sugar areas seen piling up to the extent of about Rs 10,000-15,000 crore in UP state alone.
So if this happens, because ultimately even farmers are smart, even millers are very smart because they know that they cannot have the larger piece of the cake or of the profit. So if it happens, it will be extremely positive for UP based sugar mills. In fact, whatever positive effect we have seen in the share prices is just on the expectations.
I do not know whether the recommendation of centre will get accepted or not, but I am quite hopeful that because of the BJP government at the centre as well as the state, maybe this will get accepted in due course of time in the next couple of months because there is no urgency to take up the SAP at this stage. Season is going to start in the month of October, but if this happens, this will be seen extremely positive for UP based sugar mills.
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