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Last Updated : Aug 08, 2017 04:54 PM IST | Source: CNBC-TV18

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.

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: I first wanted your thoughts on this SEBI circular. I asked you this because there are a couple of stocks where we have seen, genuine businesses, but these stocks or these companies have also been classified under those shell companies, Pincon Spirit, J Kumar Infraprojects, even something like Prakash Industries where you have expressed bullish view. So what do shareholders do in this case?

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A: First coming on this 331 companies, excellent move on part of the Ministry of Corporate Affairs, who in turn have given this list to SEBI for taking the corrective actions or maybe the requisite actions required in that regard. And you have used the word rightly that couple of companies, and in fact, this whole list, I have this 10 page list in front of me, 331 companies, in fact I have tried to mark and I could only be able to see seven companies which can be taken as a genuine companies.

Prakash Industries, since you have mentioned, I have been keeping a positive view. Company has already made their representations to the stock exchanges saying that they have paid Rs 650 crore having Rs 2,400 crore value of assets. They got the coal linkages, mines from Coal India, they got mines from the government in Odisha and all sort of things. So I am not holding the brief of Prakash Industries here, but since you have referred the first, let me give you the background that there these shell companies, the word used, direct and indirect beneficiary of the nexus, the word which has been used.

And if you see, which in fact I have made a lot of homework on this and if you recall about 4-5 months back, at the start of the financial year, I have said in the afternoon show or maybe in the morning show that we have prepared a negative list. And at that time, in fact, maybe Latha or someone asked me that what are those stocks, but I said that that is for our internal consumption. And when I collated this list with that list, about 150 stocks are falling in the same category. So I think this is an excellent move.

There is no point in making hue and cry on those seven companies which I may be feeling it have value, you may have some 2-4 companies more. But if you really see these shell companies that has originally started, shell may have been used loosely for these 6-7 companies because they are not shell companies, they have the manufacturing facilities, they have assets, they have profitability. And they are paying taxes, as Prakash Industries having paid Rs 650 crore.

But many of these companies have origin from the investment companies or shell companies from Kolkata and other parts of Delhi, Mumbai and all sort of things, but mainly from Kolkata. And in fact, if you see, Pincon Spirit also, I am not trying to put any allegations against any of these companies or not trying to defend anyone. If you really see the same kind of, either having the common director or having the common list and all that.

In fact we have collated about 522 companies and those companies list having from Kolkata, that same common address, common directors and all sort of things. So maybe if those 6-7 companies or 8 companies makes the representations to SEBI or to ministry of corporate affairs, I think definitely they will get an escape from this.

They will get excluded from this company because maybe accidentally or erroneously those companies may have included in the list because of some direct or indirect, on the pretext of direct and indirect nexus, they may have had some kind of dealing, having loan taken or, in fact which in the common commercial parlance we call it having taken entry. It is not the actual loan.

So, probably if they present their case before SEBI or maybe before MCA, probably those companies will get excluded, but I think this is an excellent move and there is no need to worry being an investor. Suppose if you are an investor in the company, I have recommended Prakash Industries and you have rightly said so, if I am invested into the stock of Prakash Industries, which I am, I am not worried because maybe company will make their presentations and maybe they will get an escape from this list of shell companies.

So this is an excellent move and I think that this kind of move will keep coming in and probably I will not be surprised because these are some of these companies, about 130 companies are only listed on NSE and rest all are on BSE. Probably if you dig the list on BSE, you may find 500 such companies still which can come in the second, third list, depends on the investigations being carried out by these authorities. So I am very happy with this move and I am not taking an isolated case where the accidentally or erroneously some companies have been included, they will get excluded if they present their case strongly and correctly before the authorities.

Surabhi: Does Glenmark Pharma have that kicker that can yield results of the next two years?

A: This member wants to enter Glenmark with a view of 1-2 years. That means he is very clear in his vision that yes, he can have the conviction and time horizon of two years. With that view, he can definitely enter because there are many of the positives lined up for Glenmark even if you see the Q1 numbers, having posted by the company, they have been quite good and in fact, apart from this, though we have not been compulsive buyers in the pharmaceutical stocks.

But those who wish to, maybe because they want to have the pharmaceutical stocks also in their portfolio, we are advising them to go with Aurobindo Pharma and Glenmark. So obviously, the stock falls in our selected choice as well and with a two years' view, we can buy it now.

Surabhi: One of the stocks that we often discuss with you, Century Textiles, actually moving against the tide today, it was a recommendation by our technical experts as well. Are you expecting any kind of a big trigger to come through as we go through the result fine print at the end of Q1, this unlocking of value, are you expecting it some time soon?

A: If you first go through the results probably, I think the market has still not yet analysed these mind blowing results. If I just give the example, probably this would have been a pure cement company, probably this would have been the best results having posted by cement. If I just quickly go through cement, EBIT has risen to Rs 170 crore from Rs 52 crore. On a sequential basis I am referring to.

And if you take the Century EBIT margin of cement division, it has come at 13.5 percent against Shree Cement having posted 11.3 percent for the same quarter, Orient Cement 13.88 percent, ACC 12.29 percent, UltraTech Cement 18.1 percent and Ambuja Cement 16.97 percent. I am taking of all the cement capacity, having capacity of 10 million tonnes because Century also has a capacity of 14 million tonnes. So probably from 4.1 percentage as EBIT margin seen in Q4, if you are jumping to 13.5 percent EBIT margin and I think that this is sustainable.

In fact I have said that apart from monetisation of the paper plant, Kumar Mangalam Birla has put in a huge, a new team and that has been closely watching the operations which has resulted in this ramp up of the EBIT margin. And if this gets sustained, because if you see the earnings per share (EPS) of about Rs 11 having posted by the companies after the deferred tax of Rs 66 crore which is a non-cash item.

So if you add that, it is Rs 17 EPS for Q1 and it is very much sustainable. So just imagine the kind of turnaround which we have seen in the performance of the cement division with huge, probably the stock which is valued, the cement division getting valued at about maybe USD 95-100 definitely will be seeing the market cap getting expanded maybe because of the enterprise valuation (EV) valuation being given to cement division.

Coming on paper division, again paper division has performed very well with EBIT of about Rs 88 crore against Rs 52 crore on a sequential basis. So even that is going to give them and I am quite certain that paper division is going to get monetised, maybe by the company in the next couple of months.

And if you take the EBIT of Rs 88 crore, that translates into closer to about Rs 450-500 crore as EBITDA for whole of FY18 which can definitely fetch them a very good valuations which they have been looking at, at about Rs 4,500 crore. So apart from monetisation after looking to Q1 numbers, in fact my positive view, have built up more because of the sharp turnaround seen into the cement division of the company.

Surabhi: There is one pocket where we have seen buying today and it is metals. So, Tata Steel, some of the targets are very handsome, Rs 800 plus is what we heard from some of the brokerages in the morning. Would you buy anything in metals?

A: I have been giving buy call on metals for about maybe 3-4 months back and I have always said that if you really want to outperform, hunt for ideas in the midcap space. I agree that the Tata Steel numbers have been good, but in spite of reading the analysis of the domestic business, having given as good numbers, I do not agree that because if you make the comparison with the long products which are made like Prakash Industries and Sarda Energy, forget Prakash Industries having included in this 331 list, shell companies, if you just knock that off, the kind of performance which we have seen is much better.

Or even on a relative basis, if I compare Tata Steel standalone numbers, that is India operations with JSW Steel, probably Tata Steel is giving me a disappointment. Because if you really see on a year-on-year basis, the numbers are seen flat. On a quarter-on-quarter basis, the numbers are seen quite down in spite of Kalinganagar having added three million tonne capacity. Coming back on metals, yes, as I said, we have been keeping a positive view and we continue to have so for the next one year, but we will be keeping our focus more on the midcap steel stocks rather than larger one like JSW Steel and Tata Steel going forward.

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First Published on Aug 8, 2017 04:51 pm
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