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Last Updated : Aug 11, 2017 04:12 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: First thoughts on State Bank of India because the market is surprised with these numbers on the negative side. Your first reading?

Close

A: If you see the results that obviously you have all the reasons to get disappointed and if you see the commentary then you have no reason to get disappointed because firstly all the five associate banks and one this Bharatiya Mahila Bank also got merged with the bank from April 1.

And you have seen the effect and as Mrs Bhattacharya has explained that how the integration with the audit has been in a staggered way every week. But one can understand the cumbersome job having done by the bank and at that time, definitely, you see your management bandwidth getting shifted from the asset quality management to the administrative work of completing the integration work, finalising the accounts and all sort of things.

And that is the reason you have seen the sharp jump in the net NPA in relative terms as well as in absolute terms. So taking all this into consideration and the quality of those five banks, State Bank of Mysore, State Bank of Travancore and all that, the kind of huge poor asset quality and if that gets pooled into the main bank, then obviously you are going to see this kind of pain, so it was partly expected. But yes, when you see those numbers getting crystallised and presented then you get more shocker and because of these bearish sentiments prevailing in the market, probably the negatives are seen more, otherwise, it is not such a big shocker having seen from the merged SBI for this first quarter.

Q: What is happening here because market has been hoping that they will improve their margins to double digits, but somehow they always disappoint, at least this quarter they have disappointed and the stock of course had a big rally. At Rs 536, what is the call on TVS Motor Company?

A: Two points. Firstly, I think maybe something must have come from the management commentary which I am not privy to. Coming second on the expectation of the double digit margins, sometimes I am unable to understand the street expectation because I do not think that that is so easy even in FY19, that looks doubtful because when they are capturing their market share.

Now just to give you an example, I have seen the estimates and all sort of things. If the company has sold 8,02,000 vehicles in the quarter that is Q1, against Q4 of 6.75 that means a 19 percent increase. And it is a logical way of estimating the results based on the quarter-on-quarter (Q-o-Q) if there is no seasonality element and if the company is showing the profit before tax (PBT) of Rs 179 crore against Rs 134 crore, I honestly do not understand that where is the disappointment.

Coming on the earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of 7.1 percent against 7 percent again is seen to be very much on line. So maybe sometimes, what happens that the expectations are set quite high and if you have these kind of targets, because if you recall, in this last three months of Q1 of FY18, all the months had the good sales as compared to their peers, whether you take Bajaj Auto or Hero Motocorp and because of that the sales were seen at 8,02,000 against 7.18 on a year-on-year (Y-o-Y) basis and 6.75 lakhs on Q-o-Q basis.

So I am honestly not disappointed with the margins because the expectations were not so much high at our end but yes, coming on the commentary and sometimes, the kind of run up which we have seen, probably TVS Motors is the best performer in terms of the share price appreciation in this last 3-6 months and that could be the reason that the stock is correcting because of the profit booking or maybe because of the lower leverage positions or maybe because of something which may not have got liked by the market in the management commentary.

Q: The same question that I asked you yesterday as well. From the retailer investor's point of view, there are too many negatives right now. We have seen the border issues, there is the North Korea issue and of course, there are a couple of domestic issues as well. In this kind of market, would it be prudent to raise some cash levels to participate later or do you think a large part of damage is done now?

A: I do not think that except on the North Korea issue there are any issues which are seen really to be so serious considering the already the correction having taken place in our markets. So I will advise and in fact yesterday also I have said that I am expecting the buying to get resumed from Monday because the market technical factors are more important to take a call on our markets because the kind of weaknesses which we have seen in the global markets got reflected here and the market has become very light.

And I will not be surprised to see the market having gone in the oversold zone also. So if any buying which comes in on Monday, in fact if you see today also, majority of the or maybe 5-6 stocks have contributed to the 70 point fall in the Nifty. In fact in many of the smaller index heavyweights or maybe in the midcap stocks we have seen the buying coming in in many of the stocks which are not reflected into the index. So already the strong hands are buying. The valuation and that is seen not reflecting into the index.

So I will not be keeping a weak bias from Monday onwards and yes, whatever, if you want to deploy, probably this is the time for 15 minutes or if you are a cautious investor, wait for Monday and take a call again but I am expecting that markets seem to have bottomed out at least the Indian market goes. Except for North Korea, I do not see any other negative for our market.

Q: CG Power, one stock which you track had a vertical rally in last hour of trade. How important is this binding bid that we have, it is for the Hungary subsidiary for 38 million euros. Do you think it deserves the kind of rerating that it saw in the last hour of trade?

A: In fact you have to read this news in the context and I think this deserves much more an upmove apart from what we have seen today because if you see management commentary about one year back they have said that they are exiting from all their global businesses. They came out from business to business (B2B) automation business having sold those business for Rs 700-800 crore to a Middle east party.

And if you take the situation now, I am excluding this Hungary business, I will come a little later on this, the company is virtually debt free on a net of working capital because they have a working capital debt of closer to about Rs 700-800 crore and they are doing extremely well in India in their transmission and distribution (T&D) business because the kind of investments which I have been keeping a positive view on the stocks like Siemens, ABB India, GE T&D India, Crompton Greaves, CG Power.

All are falling in that space and company has taken a conscious move of exiting from that. Now come on this news Hungary business only of power that is power business excluding switchgear and mind it, switchgear is always the heart of any of these T&D space and company is having a good command. So, fetching a valuation of closer to Rs 290-300 crore for the Hungary business excluding the switchgear business is really phenomenal. And kind of other units, in fact maybe about a month back they monetised their US business for about Rs 60-70 crore, that was gone unnoticed by the market.

So this process of monetisation of their overseas investments in bits and pieces will keep on happening from here on. And probably next six months they should be able to monetise additional about Rs 700-1,000 crore or maybe Rs 650-700 crore and that is seen quite positive. So maybe on a net of working capital also, they will become debt free. Extremely positive and probably that is the reason stock has in fact risen 18 percent from the days low and closed with a gain of about 11 percent.

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First Published on Aug 11, 2017 03:31 pm
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