In an interview to CNBC-TV18's Sonia Shenoy and Anuj Singhal, SP Tulsian of sptulsian.com spoke about his readings and outlook on the fundamentals of the market and specific stocks.
Below is the verbatim transcript of the interview.
Sonia: Godrej Consumer Products is clearly the stock of the moment now. Do you think that it deserved a 10 percent or an 11 percent move post its numbers?
A: To give a straight answer, I would say that yes, it deserves that because if you see, Q4 numbers definitely seem excellent. If I just come on the ultimate growth of the company which they have shown, earnings per share (EPS) of Rs 38 for FY17 on a consolidated basis against Rs 24, what else can you expect from the company? A growth of 60 percent. In fact, if you take first a call on the Q4 numbers, again the operating profits have shown really very good growth on a sequential basis, even if I take that on a flat, in fact there has been not much increase on the revenue, but operating profit has risen from about Rs 480 crore to Rs 515 crore.
So, I think the kind of growth in fact for these companies, if you take a call on a yearly basis, because these are the stocks you need to have in your portfolio maybe like Asian Paints, maybe like HDFC Limited, maybe like Godrej Consumer, this is the fit stock and excellent numbers and on top of it, the icing on the cake is one to one bonus declared by the company.
Anuj: CG Power and Industrial Solutions was a screaming buy for you when the stock went through that brutal correction. At Rs 83.50, what is the call now on the stock?
A: Still continues to be a screaming buy provided that we have a time horizon of at least for the calendar year 2017 if not till March 2018. For the simple reason that they have already monetised the business to business (B2B) automation business and the effect of that, market has really not understood of the company having received amount of Rs 850 crore on monetisation of B2B automation. Company will be meeting for Q4 numbers on May 19 and once that will be out, that will again be seen as a big booster because if you go by their domestic business, I do not think that any one has any complaint on their domestic business, it continues to be a profit making company.
The problems were only on their overseas business and largely on this B2B automation and transmission and distribution (T&D) business. B2B already got monetised, probably T&D business will also get monetised for may be about Rs 700-800 crore maybe in the next 6-7 months. So, this is a classic turnaround case virtually. If you knock off from the net of working capital, the company has become debt free.
If you include the working capital loan also, it is sub-Rs 1,000 crore and when you compare it with the capital goods space, because again, company is a very prominent player in power system and transformer and T&D space even on the domestic turf and if you take a call, it can get compared with companies like GE Power or maybe ABB India or maybe Siemens.
And on equity, on topline to market ratio, this is quite low. That is what I said that even on current price, Rs 83, if you have a view of about 9-12 months the stock is capable to give you a gain of about 30-40 percent in this period even from the current level.
Anuj: One of you favourite stocks, Century Textiles and Industries, could we be hearing on this stock? We are starting to see fresh moves on the stock.
A: It is difficult to substantiate any news, but if you take a call, company will be meeting on May 12 for consideration of their Q4 numbers. And we all know that they have the cement business, they have real estate, they have paper and all three divisions are going to do exceedingly well. But the unconfirmed reports which in fact I got maybe about five minutes back when I got my people to look into it that probably market is looking that or maybe expecting that company may announce the monetisation of the paper division.
I do not know how far one can really play on that because the informed circles have been saying that company is looking to monetise the paper division because paper division is a very paying and doing exceedingly well with two lakh tonne of writing, printing and news print and 36,000 tonne of tissue paper. But it was only the matter of the consideration at which the management is willing to go for it. And it was expected that the deal is likely to happen anywhere between Rs 4,500-5000 crore.
So, if I just take that as a guess-work for this sudden spurt of maybe about Rs 30-40 which you have seen in this last 30 minutes that too on a very low volume of less than one lakh share then I can only say that the trigger could be monetisation of paper division, but that will only be known by the shareholders or maybe by the investors in the May 132, Q4 numbers board meeting results where Q4 numbers will be considered. But this is just a rumour or this is just source based information which I am just trying to share.
Anuj: Thoughts on Hero Motocorp?
A: I think this is just a matter of one quarter. As Sonia has said, we have seen the inventory getting cleared at a discount of Rs 12,000 per vehicle and the huge response was seen. But that was the right move on part of the management and I do not think that obviously results will disappoint and in that case, if the stock falls, then that should be lapped as a good buying opportunity for the stock.
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