In an interview to CNBC-TV18's Surabhi Upadhyay and Prashant Nair, SP Tulsian of sptulsian shared his views and outlook on the fundamentals of the market and specific stocks.
Below is the verbatim transcript of the interview.
Surabhi: Let me take the point forward on tyres. This disappointment that we have seen from Ceat, is it reason enough to book profits right now or is this an opportunity to actually get in?
A: This is a time to book profits because if you really take a call, first go little longer, backward in the tyre industry for about six months or so. March quarter results, as such were seen under pressure for all the companies, whether you talk of Ceat, MRF, Apollo Tyres. And when we see this June quarter numbers, in fact today we are going to see the numbers of Apollo Tyres and MRF also, but the Ceat numbers which came yesterday, we have seen exactly one-third for maybe about 67 percent fall on a sequential basis whether at operating profit or whether at the profit after tax (PAT) level.
And when you see already, as I said that Q4 numbers were already dull and if you see from there, it is falling again by 65-70 percent, obviously, things are not going to get accepted. And as such, the tyre stocks are all ruling at its peak, probably on the hopes that the anti-dumping duty will come.
And one more thing that if you really take a call on Q1, the rubber prices were a bit soft. So obviously that advantage of the lower raw material prices should have been got reflected into the results which has not been seen happening. Maybe one can argue that because of the stocks held by the companies, because raw material is a critical component and always companies hold the raw material for a longer-time but that also cannot justify the valuations at which tyre stocks are ruling.
Probably the trading momentum which we have been seeing in the share price largely of Ceat and it was followed and reflected more into Apollo and MRF, I think that once that profit booking starts happening with the strong hands, strong hands, they do not get panicked immediately on the negative view, but that is bound to see getting reflected into the share price and share prices are bound to get corrected probably in the next 1-2 weeks.
And I will not be surprised to see them correcting by about 10 percent from here. It has not been shown showing that kind of weakness today, but once the results of MRF and Apollo also will get reviewed in and maybe followed by JK Tyre in the next couple of days then probably the tyre stocks will get rerating unless and until of course, the anti-dumping duty if coming in from China, then that can just be a saving grace. Otherwise, keeping a negative view on tyre stocks.
Surabhi: If I remember correctly, out of the three pharmaceutical companies you like, Aurobindo Pharma, Glenmark Pharma, even Divis Laboratories is one of them? What is the view here?
A: That is right. In fact these are the three stocks in the same pecking order with first being Aurobindo, second Glenmark and third Divis because Divis, if you really take a call on Q1 numbers, numbers were definitely disappointing and post that also, we have seen the share correcting. But I think all the negatives seem to have got factored in and I do not think that much problem in terms of the valuations, because from here on, you can only expect the better news to start flowing in specifically for Divis. So, we have been keeping positive view, but obviously, the same pecking order and only on these three pharmaceutical stocks and not on any other ones.
Prashant: What are your views on switching from Dr Lal Pathlabs and CRISIL to Healthcare Global?
A: I will advise to first exit from both the stocks and again Healtcare Global is not seen to be the good alternatives where he should switch into. If he wants to remain invested in the healthcare only then probably Apollo Hospitals looks the best. But, in that case, he has to have a longer horizon of at least a couple of years. Or he can look to move into the sugar stocks which are now the theme and that theme and positive bias is likely to remain for the next six months or so. But ideal shift from healthcare and from CRISIL would be more appropriate in Apollo Hospitals than in Healthcare Global.
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