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Last Updated : Dec 13, 2017 11:00 AM IST | Source: CNBC-TV18

Here are SP Tulsian's views on fundamentals of market

Watch the interview of SP Tulsian of sptulsian.com with Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18, in which he shared his readings and outlook on fundamentals of market and specific stocks.

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Watch the interview of SP Tulsian of sptulsian.com with Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18, in which he shared his readings and outlook on fundamentals of market and specific stocks.

Below is the verbatim transcript of the interview.

Sonia: First I wanted your view on Bharti Airtel, and not just Bharti Airtel, on Dish TV as well after Bharti Airtel sold that 20 percent stake in their DTH arm. How would you approach those two stocks today?

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A: First if I take a call on Bharti Airtel's DTH sale, I don’t think that this is really something to cheer about because if you see the deal having happened at about maybe USD 1.75 billion if I am not mistaken, because 20 percent has been sold to Warburg Pincus. The market was expecting mildly better price for that and this amount will be used by Bharti Airtel largely for the debt reduction if I am not wrong, because though they have their capex requirement which can – either this money will go there or will reduce the debt. So that is also not that significant looking to Bharti Airtel having a debt of closer to about Rs 80,000 crore. So in the background, one can say that it is in the neutral for Bharti Airtel.

Coming on Dish TV and all sort of things, I don't think looking to the results and the scenario going ahead, as the things pan out for the sector, maybe for the DTH sector, things are not looking very rosy because the kind of competition which we have seen in the telecom, is likely to get heated in this sector because of Reliance Jio because Reliance Jio is just keeping mum on their foray into this in a big way and that is likely to happen. So I think that the time for the DTH players are seen to be quite tough going ahead. In that background, we are keeping neutral stance on Dish TV as well going forward.

Anuj: This rising bond yield has once again derailed the NBFC recovery. We have seen stocks like L&T Finance correct quite a bit, other as well, M&M Finance, Ujjivan Financial Services, JM Financial you have been keeping positive stance on some of these? Do you think this current weakness is a great buying opportunity?

 A: Firstly, to correlate the financial performance or to take an investment call on NBFC along with the rising bond yield or maybe falling bond yield is a short-term phenomenon. If you want to have a micro view maybe for one month, couple of months, then you may argue that yes, this has seen negative and in fact if you see the situation in this last couple of years we have been in a fallen interest regime and that has definitely worked in favour of all the NBFCs. But that doesn’t mean that they are not strong enough in re-balancing their lending and keeping their net interest margin (NIM) as intact.

If you see the situation, you have referred some of the micro finance companies also in the same breath like may be Ujjivan and all that they are also tapping the low cost deposits also which will be seen quite positive. When you have heard the Ujjivan management they have said that probably, I don’t remember maybe 200-300 basis points interest cost is going to get corrected or that will be giving that advantage. Similar is the case with all other NBFC but you have to read the background that the kind of valuations and the kind of time horizon. If you really ask me I have been selective and this is what I have saying that yes we are keeping positive stance on maybe the stocks like Bajaj Finance and Capital First who are purely NBFC player and keeping positive stance on maybe gold financials or may be micro finance company like Manappuram Finance, Muthoot Finance and Ujjivan.

Anuj: What would be your long term stock idea?

A: I am recommending Arcotech. In fact this stock was recommended by me about a month back on November 8 at Rs 54 and stock has moved to a level of Rs 62 plus yesterday almost moving to my earlier target given. So, I thought of revisiting the stock because the Q2 performance is seen to be quite good because company, if you see their main business, they are making the semi-finished copper and copper based alloy products and maybe when we have been talking of the cryptocurrency so much, it has some kind of reflection of kind of cryptocurrency also because they are supplying coin blanks to the Indian mint, one which all these coins are engraved and embossed. Plus they are supplying the key blanks also, key blank connectors to Maruti Suzuki, Hero MotoCorp, and all kind of products which largely cater to the automobile and defence.

So this is a very interesting story but market was fearing just to give the background, the stock had touched a 52 week high of Rs 162 in February 2017 and thereafter because of the sharp increase in the copper prices, market was apprehending that probably company will report losses in March quarter, maybe in June quarter, similar was the fear for September quarter and on this fear the share price corrected from Rs 162 to Rs 54, when I recommend the stock about a month back and now it is ruling at Rs 58. However, the performance did not show in any of the quarter the losses or maybe the bottomline was not seen in negative.

If I just quickly go by the financial performance, Q1 PAT was slightly lower at about Rs 6 crore but Q2 PAT has come in at Rs 7 crore. Company has a face value of Rs 2, 75 percent promoter stake, it is a totally debt free company virtually if I net off the working capital because this is a highly working capital intensive industry where the current assets are of about Rs 300-400 crore on a net current asset and they are largely financed by the net worth and about small borrowing of Rs 50-70 crore by way of debt and maybe about Rs 150 crore as working capital.

So taking a call on the Q2 numbers, the situation is seen to be quite good for H2 because the automobile sales are generally seen to be better in Q2. So taking all this into consideration, I am not going into much of the background because equity is low at Rs 21 crore, net worth Rs 235 crore, book value Rs 22, promoter stake of 75 percent, so, taking all this into consideration, share at Rs 58 looks good and one can look for a target of about Rs 70 in next six months or so.

For full interview, watch videos...

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First Published on Dec 13, 2017 09:10 am
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