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Last Updated : Jan 18, 2017 03:07 PM IST | Source: CNBC-TV18

Here are a few investment ideas from SP Tulsian

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on specific stocks and sectors.


In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on specific stocks and sectors.

Below is the verbatim transcript of SP Tulsian's interview to Sonia Shenoy & Anuj Singhal.


Sonia: Your thoughts GSPL (India) because we do understand that the Petroleum and Natural Gas Regulatory Board (PNGRB) has put out a consultation document for finalising tariffs for the company's high pressure pipeline network. The expectation is that it could be above 59.7 per mmbtu versus 26 that it is currently, any thoughts on how to approach this stock after the big run up?


A: Yes, this news is under consideration but let us not see the near term rally which we have seen in the stock price. If you take a longer picture, the stock has remained subdued and is a non performer and if this news comes through this will see a big positive for the stock and can make the stock move in the new range. Therefore, I am keeping a positive view on the stock expecting that positive outflow will be seen from the regulatory bodies.

Anuj: According to reports, Diageo maybe looking to increase stake in United Spirits. Would you buy that theory and would that change your view on the stock?

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A: Diageo seem to be keen to increase stake to 70 percent and this news has been going on for last 12-18 months, in fact the pledged shares of the promoter group, the Mallya group also have been mopped up by them but if you take a call, the kind of fundamental growth which we are seeing into the company, is seen to be static or muted for the last 18 months or so. Nothing is seen having taken place though the market is very bullish that they will be taking increased route either via open offer but I do not know because if you have seen the prices having corrected and even if the open offer comes now or maybe the preferential allotment because I do not think the company need too much money for making a preferential allotment because if they want to ramp-up their stake to 75 percent, the huge infusion will take place. So even if the open offer comes in, I do not think that will be seen too attractive. Therefore, fundamental prevails more over this expected news flow of Diageo increasing its stake to 75 percent stake in the company. So I wouldn't be playing long on the stock just on this news, as I said it has been floating in the circle for about 12-18 months.

Sonia: Any thoughts on how investors can approach Delta Corp from here on?


A: Apart from demonetisation the results are seen to be flat, in fact on taking year-on-year (YoY) call there is no point in taking a quarter-on-quarter (QoQ) call because Q2 is always seen better and there is no point in taking a QoQ call. Therefore, on YoY the stock has shown flat performance and if you want to see half glass full probably one can argue that in spite of demonetisation we have seen flattish kind of performance on the company, but I agree that this result will not cheer the market and the kind of run up we have seen after the stock having corrected to a level of about Rs 100 and bounce back may see the profit booking but this stock maybe meant for medium-term investors, those who have been keeping a view of about six-eight months but near term weakness may be seen but I am not so disappointed with the numbers as I have said that if you take on YoY basis, the results are seen flattish which is not seem to have been impacted so much by demonetisation.


Anuj: Are you recommending your clients to subscribe to Central Public Sector Enterprises (CPSE) exchange-traded fund (ETF) follow-on offer?


A: There are two things. One, CPSE ETF have rewarded very well in the past. Second, there is a discount of 5 percent. So those things are attracting the investors. Third, those who are looking for mutual funds, because the larger weightage in this basket, Oil and Natural Gas Corporation (ONGC) and Coal India carry maximum weight and we are keeping neutral stance on both the stocks because I am not keeping positive stance but the kind of liking which people -- in fact they go by the past track record and those who are looking for mutual fund investments, will be getting an upfront discount of 5 percent. So that is always factored in your valuations and returns. So those looking for mutual funds among the mutual fund basket can go for it for a moderate return but if you are an equity investor and can take a call individually on each stock, will always be rewarding.

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Sonia: How to approach real estate because suddenly it has come back into fashion both from a trading angle as well as a lot of brokerages, fund managers recommending real estate now. Is this a space that you would be bullish on in the medium-term and any specific stocks you are looking at?


A: If you are keeping a medium-term view then I will take a positive call but for next three-four months because generally the real estate, I am talking more into housing sector, during April and May and maybe start from March to June is always a best season. I do not think this is going to be a time where we will be seeing good offtake coming in but in the past when demonetisation has happened and while talking to the developers and the land owners in the tier two and tier three cities, they are really bullish. If you see the average rate per square feet, it is ruling at Rs 2,000-2,500 per square feet and land prices have fallen, which will result in the reduction in the selling prices by about Rs 300-500 per square feet largely because of the reduction in the land value. So allow June-July to come and thereafter huge transactions of land and purchases of residential flats will start in mumbai as well as other part of cities. So, if you are keeping a near term view of about two-three months or couple of months or looking for good season for this real estate for this summer, as I said March to June, I do not think that that is going to happen. So have a medium-term view on the stock but for the next three-four months I will be keeping a new neutral view on the sector.   


Anuj: Anything from the midcap space that you would look out for?


A: Nothing interesting because the results lined up like Hindustan Oil Exploration Company, International Paper, Kirloskar Industries probably I will be keeping an eye on the International Paper that's Andhra Pradesh Paper Mills because to look for the trend, I am keeping a positive stance on paper stocks and that may give an indication on the expected performance of many paper industries like Kauntam Papers, NR Agarwal Industries, Seshasayee Paper and Boards, Tamil Nadu Newsprint and Papers (TNPL), Shreyans Industries - that will just be an indication but largely Sterlite Technologies, Trident, RS Software (India), Phillips Carbon Black, Kirloskar Industries, KPIT Technologies, nothing seen to be coming very attractive in Q3 from these companies.


Anuj: Your thoughts on the report that the government may ask Hindustan Zinc to give the dividend of Rs 11,000 crore. Would you buy that?


A: It's the most sensible move on part of the government and this seems feasible because Rs 30,000 crore is the cash held by the company as on December 31, maybe on September 30 they had Rs 27,500, add Rs 2,500 crore profit after tax (PAT) of Q3 because Q3 is seen to be quite robust; 44 percent higher metal production. What is the government holding - 125 crore shares. So hypothetically if I presume that the company uses half of its cash kitty of Rs 30,000 crore and distribute Rs 15,000 crore - that means that amount to about Rs 18,500 crore including dividend distribution tax. The government will get Rs 3500 crore as the dividend distribution tax and Rs 4,400 crore - their share of Rs 35 because if you take Rs 15,000 as dividend, Rs 35 per share will be the dividend to be declared by the company. So government can easily mobilise Rs 7,500 crore and if the government has clearly indicated their intension as Piyush Goyal repeatedly said that the government is looking to divest their stake. Why not to take this 30 percent; 29.5 percent stake, which the government has the cash on hand.

So this is very much feasible and on the divestment front the government is slightly missing the target though they are not very keen because of higher direct and indirect tax collection. Therefore, I am expecting this to happen and looking to the higher production of zinc and metal both, though the company has produced lower silver production by about 10 percent in Q3, the Q3 numbers are going to be seen quite robust and going forward the way London Metal Exchange (LME) zinc and lead prices are moving up, Q4 will be seen equally impressive for Hindustan Zinc. So taking all this into consideration, you have the expectation of fat dividend of Rs 35 per share, robust Q3 working. So I am keeping a positive stance and won't be surprise to see the stock moving to Rs 300-310 in next one month or so.

First Published on Jan 18, 2017 09:00 am
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