Here is why SP Tulsian is bullish on Crompton Greaves

In an interview with CNBC-TV18, SP Tulsian, sptulsian.com, talks about Sony buying Ten Sports from Zee Entertainment. He also talks about the pros and cons of radio and tyre stocks. Finally, he tells us why he is bullish on Crompton Greaves.

Below is the verbatim transcript of SP Tulsian's interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Sonia: I want to talk to you about the exclusive that our colleague just broke a while back with regards to Zee Entertainment, where we understand that Sony is likely to buy Ten Sports from Zee Entertainment for almost Rs 2,000 crore. The stock has hit a 52 week high, but how much of a positive do you think this could be considering that their sports business has been loss making for so many years? A: In fact, this is what has keeping the shares to move up for quite some time, because if you see the Q1 numbers, post Q1 numbers I have not been too satisfied with the Q1 numbers, which could be used as a trigger for the stocks to really move up, but exiting from the stock because we have seen that the company has been struggling making losses and that was keeping overall bottom line of the company in the red and the market has been expecting this to happen for last about couple of weeks and the price also was known in the market that Rs 2,000 crore will be the price at which the deal will get consummated. So this is a good exit for the company and apart from the losses getting curtailed from here on, company will be able to focus on the core because the kind of diversion or maybe the leakages of the managerial capability which was going on and all these things can get diverted to the main business of the company or the main channels where they are really doing quite well. So maybe the advertisement revenue or maybe the better programming can give them the better advertisement revenue, so because of the exiting from a loss making and not so related or strategic business seen for the company this is being received by the market quite well, but I won’t be taking a positive or a buy call on the stock, because I think I won’t hesitate in saying that the stock looks overvalued because this news was expected or anticipated for the last couple of week. Latha: You want to give us a view on Reliance Capital move as well? A: In fact, in all the Anil Dhirubhai Ambani Group (ADAG) companies, the monetisation plans are there or has been existing and same thing is happening in Reliance Capital also, but I have not seen anything getting materialised or the concretise, except for the cement business which has happened with the Oriental Cement, so overall yes these things are likely to happen, but I don’t think that I am not too gung ho on the radio business, because if you really see the situation in which the radio players are existing whether you talk of Jagran Prakashan or whether you talk of ENIL, I don’t think that things are really looking that much profitable for any company. I don’t understand the reason for Zee Entertainment to take such a big, since they are getting this Rs 2,000 crore or existing from the sports business which was again more of the prestige or maybe egoistic situation, Zee Entertainment should have exited from the sports channels maybe about 3-4 years back, but I am not keeping a positive view on the radio business going forward, whatever we may talk of, but I am not keeping positive view, but yes any debt reduction plan is seen happening or is being talked in the ADAG Group, but we have to see the deal getting consummated in each of the area. Sonia: I wanted to ask you about some of these tyre stocks. JK Tyre has hit a fresh 52 week high today and you also have couple of others like Apollo Tyres that are surging based on lower rubber prices, is this the pocket that you would trade in or buy into at this level? A: Definitely, reduction in the rubber prices are seen positive for the stock, but I won’t be taking that as the only trigger to enter into the stock, because the kind of volatility which we have been seeing, more especially in the JK Tyre having run up by about 40 percent in this last 40-45 days or maybe. Apollo Tyres having moved up by 15 percent, but if anything positive or if any kind of protection comes from the government like minimum import price (MIP) kind of things, which we have seen in case of the steel, then that will be seen as a big trigger, because I think the volatility in the commodity prices keeps going up and down, if you see again rubber prices moving up by maybe 2-5 percentage, then again we will see the stocks correcting, so not on a fundamental basis I won’t be keeping a positive stance and as such on Apollo Tyres I see the stock having moved to its fully price level. Even in case of JK Tyre because of the integration pain we are going to see the Kesoram unit which the company has acquired, I am not keeping a positive stance, but as a trader Ceat having some upside potential for the traders in the near term as well. Latha: You take a lot of interest in these kinds of companies. Is anything interesting to you as well? A: We have only been giving call on the Pasupati Acrylon because if you really see the kind of performance the company have posted for Q1 as well as for Q4, except for that, we are not keeping a positive stance on any other stocks. Latha: I also wanted your advice on Bharat Financial Inclusion or the old SKS Microfinance. There is, as Abhishek was telling us, an analyst call. How would you approach the stock itself? A: The trading momentum is seen quite high in the stock and if you take a fundamental view, then I am not convinced on the purely on the fundamentals because you have the very better peers available like Equitas Holdings or Ujjivan Financial Services. One can even place Manappuram Finance or Muthoot Finance in the same category. But if you really take the momentum or maybe the trading grip on the stock, that is quite good. But the stock having corrected from a level of Rs 950 to as low as Rs 800 and now, at the current price, I do not think much weakness is seen of. Let us see what comes out from the analysts meet and what is the outlook taken off, but from here on, I will only be taking a positive view as a trader and not as an investor. Latha: Results due today, your view on Crompton Greaves? A: I have been keeping positive view on the stock because for two reasons. Firstly, after the restructuring, if you really see, the company, the management has said that they will be making the company debt free. Now of the purely of the electrical company and that is seen quite positive. And they have been seen aggressive in exiting from their overseas business which has been seen a big drag. I am not expecting too much coming in from the results, but they will not be bad as well because if you really see the transmission and distribution (T&D) space, that has been doing quite well and company has a significant presence in that space also. So, I am not having any kind of complaint coming in from their domestic business. One has to really keep an eye on the European business, what they are performing there and if that also shows any kind of improvement, this is seen quite positive. And the way the stock has been accumulated by strong hands in this last 2-3 months, that momentum is likely to continue. In fact if the stock corrects post the numbers also, though it has corrected by about Rs 6-7 in this last maybe one week or so, that makes a good entry point. Maybe at Rs 76-78 could be a good entry point. Sonia: Delta Corp, this stock has now doubled this year. Trading at about Rs 160. You think the move is unwarranted or do you expect more upsides? A: Why to talk of having doubled in this year? One should say that this has doubled in this last 3-4 months only and the kind of momentum honestly which we have been seeing, I am unable to accept this kind of upmove. Because if you really see the licences and Casino licences coming in for the new hotels and all that or the new property which they have started operations, even if you factor in all these things, it is difficult to assess the movement when the momentum is seen in the stock. But on a fundamental basis, I do not see this price as justified move.