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Last Updated : Jan 24, 2018 11:12 AM IST | Source: CNBC-TV18

Here's a fundamental view on market from SP Tulsian

Watch the interview of SP Tulsian of 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.

CNBC TV18 @moneycontrolcom

Watch the interview of SP Tulsian of 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. 

Latha: Plenty of earnings to ask your opinion of, well first up Indiabulls Real Estate, we really don’t know how to read this? Obviously year-on-year (YoY) numbers are good, quarter-on-quarter (QoQ) there seems to be a cost increase how should we approach this stock?

A: I think the numbers are disappointing, because if you really see this spurt which has taken place because of the completion of the project if you see the revenue has really increased I am referring on a  QoQ basis, revenue increased to Rs 2,164 crore against Rs 826 crore in Q2. That means the real estate has shown an income of about Rs 1,940 crore against Rs 567 crore. But has been the EBIT Rs 60 crore against Rs 146 crore, so I don’t think that these are really very healthy number.

Coming on their annuity income even there we have not seen much increase having happened. Even there also the things are not looking very this one with a marginal increase of about Rs 17-18 crore on a sequential bases because if you take the annuity majority of the premises are leased out which are coming either for the rent renewal on the annuity bases or the fresh leases are given. So, overall if you really take a call profit before tax of Rs 109 crore against Rs 181 crore on a sequential basis even YoY the PBT has been at Rs 63 crore I think that the numbers are definitely disappointing on their core business.

Anuj: What about United Spirits (USL), the numbers look weak, but do you think the weakness would be used by investors to buy into or do you think that this stock could de-rate from here now?

A: Numbers I won’t say that they are looking weak, but they are looking flat. Probably what happens when a stock runs up, people start building up the high expectations also. But I won’t be saying that numbers are very poor but they should have factored in or they should have enjoyed the molasses reduction, in fact this I said maybe couple of months back that the numbers of the distilleries will be looking good in Q2 but not in Q3. Because in Q2 the price of molasses crashed to a great extent by about 75 percent and that has seen having reflected into the better numbers of Q2.

If you take the call now for USL I think it is more of the huge run-up having seen in the share price vis-à-vis with the Q3 numbers. If the share would have not risen so much in fact that has been the case across the board for all the distilleries stocks and we will be seeing the price correction happening. I have been cautioning maybe for last one week or so that remain away, because even if you take the case of Radico Khaitan where we initiated a buy call at Rs 220-230 stock moved to Rs 373-375 that has been exuberance all along in spite of the GM breweries is having posted excellent results but that is a totally different game.

But if I just focus purely on United Spirits limited, I think the PBT of Rs 184 crore against Rs 235 crore on a sequential basis seen definitely flattish. But as I said that maybe I won’t be disappointed with the numbers, but stock price of USL are definitely looking expensive. People it is not the technical position alone which will work because definitely those who have gone and bought the shares I don’t think that upside is seen much more from here. Even if the management commentary comes quite good or maybe positive so it is better that you take the profit booking call considering that the overall numbers have been flat for Q3 on QoQ basis as well as on YoY basis.

Anuj: Your long term stock bet, another steel stock, you have liked them in the past Mukand?

A: That is right because, if you see the kind of run-up which we have seen yesterday in the steel stocks and many of the ideas were given by us which have given a gain of about 50 to 300 percent maybe like Sunflag Iron & Steel, Sarda Energy and we continue with the same theme. Because if you take this company Mukand Limited they are into the alloy steel finishing and rolling business and this is a Rahul Bajaj Viren Shah group company who are holding 73 percent stake in the company. The recent development which has happened that means of the approval having all that was proposed by the company 6-7 months back, all the NCLT permissions have all come. Company will be transferring their alloy steel rolling and finish their engineering business to a subsidiary in which Sumitomo of Japan will take 49 percent stake by paying Rs 14,000 crore plus that means the enterprise value of that company has been taken at Rs 28,000 crore.


51 percent in that JV that is Mukand Sumitomo alloys LTD will remain with the company and the main business of that company will be making the special alloy steel and finish the special engineering steel which are used mainly in the automotive sector for making fasteners, bearing, transmission, fuel injections, braking system and all sort of things which are very high value items.  If you see the situation going forward company is making all the efforts to make the company debt free also because they had a debt of closure to about Rs 19,000 crore if I take as on September 30th. Once they will be having this Rs 14,000 crore coming from Sumitomo coming in even informed circles are saying that company is having surplus land at their Thane plant. They have about 400-450 acres of which 200 acre are surplus and they are contemplating to monetise that surplus 200 acres for about Rs 700-800 crore. If that happens that will further see the debt going down.

Then the company has to receive some contracts, road contract having executed for UP government and that money is going to be received by the company next six months or so. So, the main developments if you see the financial performance has been quite reasonable. If you take the case for FY17 the income was Rs 2,850 crore with EBITDA of Rs 400 crore. And they have posted a profit after tax (PAT) of Rs 24 crore and after some tax adjustment it resulted in to a loss of about Rs 24 crore. Even for first half the EBITDA has been good at about Rs 213 crore which was on the comparable basis at about Rs 180 crore on a turnover of about Rs 1,750 crore.

So, my point is that if you take all this into consideration, Rahu Bajaj Group, Viren Shah joint company, Sumitomo corporation company coming in and these kind of dramatic turnaround which we see and once the company become debt free the major portion of EBITDA will get added to the bottom line of the company. So, taking all this into account share now ruling at Rs 92 can move to a level of about 110 in next 6 months or so and those who wants to keep it for long term maybe for couple of years also can have this stock in the portfolio with a view of 1-2 years as well.
First Published on Jan 24, 2018 09:01 am
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