Here are some investment ideas from SP Tulsian

Watch the interview of SP Tulsian of sptulsian.com with Latha Venkatesh & Sonia Shenoy on CNBC-TV18, in which he shared his readings and outlook on market and specific stocks.Below is the verbatim transcript of SP Tulsian’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Some of the numbers that came yesterday, what is your comment on Voltas, Bharat Forge, you were with us when the Voltas numbers came in but on second thoughts what are your thoughts on Voltas, what are your thoughts on Bharat Forge?    A: Bharat Forge and Voltas, both the numbers we have seen during market hours but Voltas came in at the fag end when the market was closing, maybe five minutes before that. If you go by the numbers, if you see the electromechanical project division, that has been the big outperformer for the company because if you see, the overseas projects have been losing money and the company has been losing even the EBIT margins on those projects. In fact last year FY15, they had a huge provision also because of the onerous contracts.However, this time the situation has dramatically changed in Q4. If you see the EBIT, that has increased to about Rs 28 crore; I am referring sequentially, with increase in the topline also for the electromechanical projects and because of this the EBIT which was Rs 9 crore loss in Q3, they have posted an EBIT of Rs 28 crore. Apart from that, even in the other projects of engineering products and all that and the other divisions, all have contributed Rs 5-10 crore extra and because of that the operating profit has risen much better. Market has been taking a call on their air conditioning business, unitary cooling but if you take a call on a year-on-year (YoY) basis because for other three segments you need to take a quarter-on-quarter (QoQ) call but for unitary cooling or for air conditioning, you need to have a YoY view. If you take a YoY view then there has been margin compression because if you see the topline having risen to Rs 860 crore against Rs 780 crore in the similar quarter of the previous year but the EBIT is seen constant at Rs 139 crore. I am not disappointed with the air conditioning segments but it is flat. In fact it will be wrong to say that air conditioning business has contributed to this kind of growth but electromechanical projects division, if it continues to perform well, I think that can be a big game changer when they don’t have their AC business sales which is seen in Q2 and Q3; that can lend a good support. However, taking all this into consideration, I think this stock right now looks reasonably priced and I won’t go for a buy call on the stock. Coming on the other stock, Bharat Forge has definitely seen a disappointment. However, apart from that if you take a call, Trigyn Technologies, that company has posted good numbers and if you take a PAT of about Rs 13.5 crore against Rs 9 crore on a QoQ basis with rise in the operating profit also of about 50 percent to Rs 22 crore, that is seen as good numbers having come in. Maybe GlaxoSmithKline Consumer can be perceived as good results having posted by them with EPS of closure to about Rs 43 with FY16 EPS at Rs 181. Not much numbers have come after the market hours. Mahindra Holiday, I won’t be calling it as a good numbers, in fact they are flat numbers. Vascon Engineers again is a small company but that company also has given some kind of cheer on the result front. Sonia: We were talking about how during the time of the State Bank of Indore integration in FY11, the loss of amalgamation was Rs 900 crore and that was only the amalgamation of one bank. Now, with the amalgamation of five banks, the fear is that the employee cost could be much higher. How much do you think the stock could fall because of this? A: First we need to understand that this is simply a proposal and actually you have rightly referred the 2011 State Bank of Indore merger, the kind of resistance which was faced by State Bank of India (SBI) and because of that the merger of the other associates like State Bank of Patiala, State Bank of Travancore, State Bank of Mysore, State Bank of Bikaner and Jaipur, they all are kept on hold. So, there will be a lot of opposition from the unions and all that for the merger.However, I agree that every move has two sides, every coin has two sides. I agree that maybe the employee cost will rise but if you go by the financial performance of the banks having posted for Q4 numbers, I think probably if you see these three associate banks or four which are listed on the stock exchanges, they have the least deterioration in the asset quality; I am referring all the maybe about 17-19 banks having posted the numbers. If you see the kind of profits they have posted, I don’t have any kind of complaint from the results of State Bank of Travancore, State Bank of Bikaner and Jaipur, and State Bank of Mysore.So, I don’t think that this will be right to just take one side of the coin that employee cost will rise. Yes every integration, every merger has its pain but maybe in due course of time, once that integration happens, it will be seen as a very big positive because SBI is not assuming the loss making or the weak banks which was earlier contemplated for the bigger banks to acquire maybe like Indian Overseas Bank (IOB) or United Bank of India or maybe Allahabad Bank, Andhra Bank kind of things. Secondly it all depends on the merger contours also whether the equity will get extinguished which is held by SBI. So, minority shareholders will definitely stand to gain and I don’t think that merely the employee cost which will definitely get increased will be seen as painful. If this happens, if this merger goes through, I am not too impressed with the Bharatiya Mahila Bank because that is a new kid on the block, it never took off from the day of its launch, so, that will not have any impact. However, if these five banks gets merged, I see it as a very positive move from the operation point of view and even from the profitability point of view to SBI in the long run. Latha: Are you a buyer in the stock now? A: On the asset quality let me just quickly touch there, all these three associate banks have posted numbers and I don’t think that the quality of assets have deteriorated, the kind of deterioration which we have seen in other banks. Take the case of 2.77 percent for State Bank of Travancore, 2.75 percent which is better than SBI. We need to see the results of SBI. See the EPS posted by them – State Bank of Travancore Rs 47 EPS, State Bikaner and Jaipur Rs 120 EPS, State Bank of Mysore Rs 75. The same employees have given you this kind of performance and if you make a comparative sheet, I think probably these three associate banks will stand out in the best performance for Q4 in terms of asset quality, provisioning, asset deterioration on whatever parameters you want to. Coming even on the book value parameter, I don’t think that these are anywhere inferior. They all have a book value of Rs 1,000 per share closer to that and always the book value can get factored in while giving the swap ratio. However, as I said, if you ask me, market takes it very positive that whenever these three banks are getting merged I am only referring to listed ones because are only three listed banks, so market takes it very positively while it should be other way. In fact it should be seen detrimental. So, if the banks extinguish their holdings in their associates and if it gives a fair swap ratio, it will be seen overall positive for SBI. However, if you ask me as a minority shareholder, as an individual shareholder, I would have been in these three associates, I would have loved to continue as an independent entity but that is not in the interest of the banking industry, in the interest of the SBI and in the interest of the country. Sonia: We were discussing Tata Metaliks yesterday, do you see more upside for Tata Metaliks now in the near term? A: Yesterday I said that you can see huge value coming in but maybe in the near term it should take a pause but if you take a longer term view because the core business of the company continues to remain quite good and in fact the move which is initiated three to four years back, that swap ratio which was seen so unjustified, which was initiated in 2013 when the situation was different on Tata Steel front, was in fact keeping this stock down. However, since that has been officially called off and now only their subsidiary of ductile iron pipe is getting merged which doesn’t make much difference, this is seen as a big rerating of the stock. However, maybe in the longer term, in the near term stock should settle either today or tomorrow. However, today it is seen upper circuit again 20 percent so maybe by tomorrow we can expect the things to settle down. Latha: Just wanted to ask you whether we should be buying all these SBI babies now? State Bank of Mysore is up 14 percent, State Bank of Travancore is nearly 9 percent higher and State Bank of Bikaner and Jaipur around 3.5-4 percent. Will you buy any of these? You said as a minority shareholder you would feel happier if they didn’t merge but would you buy these stocks?A: As I said that analysing all these results, I think the most impressive asset quality, in fact you can say that at par with the private sector bank or even better than that. In fact it is very easy to say that these employees cost and all that but performance of three associate banks have been the best if we analyse all the public and private sector banks. Even in the given background, if we don’t chose to buy them, I don’t know what is the reason, so, I am keeping my positive stance and as I have said earlier also, the only unfortunate part that for the minority shareholder is that it is getting merged into SBI.