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 readings and outlook on the market and specific stocks.

Below is the verbatim transcript of the interview.

Anuj: One of your favourite stocks of course, Mahindra and Mahindra (M&M). Your first thoughts on the number and how would you approach this stock now?

A: Some disappointment has been seen on the passenger vehicle segment. I do not think for farm equipment, there is any kind of disappointment because if I go by the numbers, 1.38 lakh vehicles were sold and if I compare it on quarter-on-quarter (Q-o-Q) basis and if you see there, probably the earnings before interest and taxes (EBIT) for the automobile sector has shown a decline on a sequential basis from Rs 350 crore to about Rs 250-260 crore.

So, that seems to be a disappointment and that shows that probably company has been very aggressive in clearing off their inventory of BS-III in the month of March because I do not think that you have any kind of disappointment on the monthly sales of March where the passenger's vehicles was seen at Rs 56,000 vehicles which was again a very record performance, but that has all been done at a hefty discount. So overall satisfactory numbers, but I am disappointed with the passenger vehicle segment numbers.

Anuj: Good numbers on Hindalco, but the stock has rallied a lot. How would you approach it from here on?

A: First coming on the numbers, copper has given a big surprise because if you see on a sequential basis, topline has increased from Rs 5,000 crore Rs 6,200 crore. So there one has to really see the volume that what kind of volume we are seeing in the copper and that has led to sharp rise in the EBIT from Rs 330 crore to Rs 497 crore. I am referring for copper, but if you see the performance having seen from maybe Vedanta or maybe National Aluminium Company, I think that aluminium segment has not shown such a kind of positive surprise which you were expecting because EBIT has just increased from Rs 876 crore to Rs 918 crore on a sequential basis.

But overall yes, Rs 500 crore profit after tax (PAT) has largely come in because of the contribution from the copper segment. But as you have rightly said that stock has risen a lot and we are seeing the strong hands holding the stock. Probably that could only be the reason, but taking a call on a Rs 1,500 core PAT for overall FY17 on a standalone and Rs 1,880 crore on a consolidated basis with this kind of valuations, I think the stock looks fully priced.

Surabhi: I want to take up these two stocks with you, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). It has been a tale of two different cities. PFC with that massive increase in bad loans, a higher provisioning, the stressed assets and then REC, the management just coming on the channel saying that they are actually looking at reducing non-performing assets (NPA) this year. How do you look at both these companies?

A: There is only one point of comparison. We have seen provisions of Rs 8,000 crore plus in case of PFC while REC also has shown a higher provisioning of Rs 600 crore, but that is in no way in comparison to PFC. So, obviously REC is getting rightly rewarded. But one thing which needs to understand maybe from compliance point of view that how come you see this kind of in PFC, the concentrated provisioning of Rs 8,000 crore plus.

Does it mean that we need to have with caution viewing the results quarterly on a quarterly basis because it cannot come in one quarter of such a high provisioning of Rs 8,000 crore plus. So that is a cause of concern maybe from accounting or maybe the provisioning having recognised by the company, but except for that, I do not think there is any kind of difference, but rightly, REC is getting rewarded and PFC is getting penalised for that.

Anuj: Once again, I am revisiting Aurobindo Pharma because the move is now getting spectacular, 12.5 percent higher on the stock. Do you see a similar move, not of this magnitude maybe, but on some of the other beaten down pharmaceutical names as well?

A: Actually, the results which have come in has to be read in context. First I am coming on the Aurobindo Pharma and the kind of results which we have seen from other pharmaceutical companies maybe like Cipla, Lupin or maybe Glenmark Pharma, these results can really be termed as excellent, number one. Number two, at the price at which has taken a beating because of the general weakness seen across the board for the pharmaceutical stocks, probably has led to the renewed buying which we are seeing in the stock.

But coming on your questions specifically, I would have been or I have been keeping my positive view on two stocks that is Divis Laboratories and Glenmark, but Divis Lab having giving a guidance of single digit though even that can be termed as a cautious guidance and the kind of rate at which it has been ruling, probably one can say that this stock is ruling at its bottom.

Further downside is not seen. But coming on Glenmark, I am keeping my positive views. So, on the two stocks that is Glenmark and Divis Lab can be looked into from here on though the events of the Q4 numbers are behind with both. But when the stocks will start moving up probably because of the high beta nature of both the stocks, you can see the quick bounceback on a relative basis as compared to other big pharmaceutical stocks.

Surabhi: I want to talk to you about two big cyclical stocks, NTPC and Larsen and Toubro (L&T). L&T of course touching that Rs 1,800 mark today after the numbers. What did you think of both post the earnings?

A: Negative on NTPC and cautious on L&T for the simple reason because if you take the situation on NTPC again being the largest power generation company and the kind of dillydallying which we have been seeing in the results performance, I do not think that you have any kind of comfort and any kind of positive indication seen coming in.

Coming on L&T, yes if you only focus on the Q4 numbers, I do not think that you will be having any kind of disappointment but having revised the target for FY17 on the order inflow with an order of about Rs 2.60 lakh crore and the kind of commentary we have seen from Mr Naik that unless and until the government comes out with the new flow of orders because they are not looking for any kind of orders. And in fact, there has been the what you call write off of the slow moving or the cancellation order. In fact, many of the infrastructure projects which we know that in case of the real estate developments and all that, they have gone back or the reversal of the orders on hold of about Rs 5,000 crore orders have been taken place.

So reversal or maybe writing off of Rs 18,000 crore is seen as a negative for the company for FY17 from orders perspective point of view. And it is very essential that FY18 because I do not think that the groups which are really solvent and have aspirations will be looking to acquire the stressed assets and in that scenario, I do not know how much government order inflow can really help L&T. So, I am a bit cautious on the order inflow to be received by the company for FY18 and that is why I am keeping a bit neutral to mild positive view on L&T inspite of seeing better Q4 numbers.

Anuj: I do not know if you were able to glance through the numbers of Berger Paints. That is also a fairly big company now. Any thoughts? I think the prima facie numbers look quite okay.

A: No, I have not seen the numbers, but yes you are right that the paint companies have all shown good numbers. If you take the call of Asian Paints or maybe Kansai Nerolac, except for the Shalimar Paints or that too even in case of Shalimar Paints, some inventory write off and the cleaning of the books has happened. So, overall I do not think that there is any kind of disappointment and in fact the position and the picture on the paint companies remain quite positive in view of the soft crude prices and very few players available. There are only six paint companies available on the whole listed spare in the market.