Last Updated : May 25, 2016 04:17 PM IST | Source: CNBC-TV18

Here are some stock picks from SP Tulsian

In a CNBC-TV18 interview, SP Tulsian of shared his reading and outlook on market and specific stocks.

In a CNBC-TV18 interview, SP Tulsian of shared his reading and outlook on market and specific stocks.

Below is the verbatim transcript of SP Tulsian's interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.

Latha: Cipla, did the management commentary and the numbers shock you, is there further downsides?

A: Yes, in fact if you see the management commentary, they have tried to cover many of the aspects.

On the inventory they have indicated that the hit of Rs 500 crore has been taken. If I go by the inventory held by the company to the extent of about Rs 3,900 crore, which is more than three months or maybe three and a half months inventory and if on that they are taking a hit of Rs 500 crore, that is again a very bad inventory management. That is number one.

Secondly, they have tried to cover so many things. Maybe the change in accounting policy, bonus payments and increased R&D expenses but then you have these kind of things coming in from the promoters which are treated as an exception, I won't call this inventory loss of Rs 500 crore as an exceptional. Because of that the operating profit fell to from double digit to sub 3 percent, definitely disappoint because if you take a call on pharma stocks, they have taken a beating largely because of either USFDA apprehensions or maybe because of the bad management. Cipla doesn’t have the fear of USFDA.

However, if you go by the working and the kind of fall which we have taken -- I don’t think that one can say that you have respite from all these things that you will not be having these kind of losses because itself the inventory of Rs 4,000 crore and receivable of more than Rs 2,000 crore because if you see the receivables also increased. Apart from that, short-term borrowings have increased with a company like Cipla, so you have disappointment on all the fronts. If you keep analysing all these points on individual basis, you won't be having a comforting call on the stock.

Reema: What about Tech Mahindra? It has been the biggest underperformer at least in the largecap IT space, it is down nearly about 25-30 percent in the last one year. Are you getting early signs that things are improving for Tech Mahindra and therefore the risk reward is now favourable to buy?

A: Yes, if you take a call on the IT stocks, probably on a valuation front and hearing the commentary of the management, one can say though the management has been highlighting more of their ten years working and the way company grew in these last ten years, but I think they should have been more focused on the FY17 -- they have touched upon that, I am not saying that they have not spoken on FY17 but yes, looking to the corrections having taken place, they had a miserable time. One can say that FY16 was when you remembers the last Q4 came in for FY15, that was again a very bad result. Since then the stock also has corrected.

However, yes, if I want to take an exposure maybe in the pecking order, I would put Infosys then Tata Consultancy Services (TCS) and then I will go with Tech Mahindra. So you can now take a call on Tech Mahindra considering the results and going by the commentary of the management.

Latha: GSFC, the way that stock moved along with all the other fertiliser companies, would you say that the results have lived up to expectations? It doesn’t seem to.

A: You need to break up the results of GSFC in two parts. Yes, the results had disappointments but I don’t think that there is any kind of disappointment seeing on the fertiliser. In fact, it is more to do with their industrial chemical segments and all that and there they have shown the very dismal numbers. If the same trend continues then I don’t think that you can take a call because as such if you see when the company has posted good numbers on both fertiliser and the caprolactam the share price has not shown that kind of upmove, which was warranted but once you have this kind of dismal numbers coming in from the other segments, you don’t have respite. So in a nutshell you can say that the numbers are a disappointment.

Reema: What about Amara Raja? In the last two years it has been a big wealth creator, the stock has gone up 150 percent but at least in the last six months, it has been consolidating and the earnings are not much, it is a single digit growth versus expectation of a double digit growth, what would you do with Amara Raja now?

A: I agree that in the last six months, if you see the stock has been consolidating and it has corrected to great extent maybe it has corrected by about 20 percent because people have kept the expectations quite high going by the numbers on every quarter, which is unlikely because when you compare it with Exide and maybe the raw material cost, the led prices benefit having seen factored in by the company in Q3, you cannot expect the same thing to continue but yes, I think maybe the stock is now ruling at the lower end of the price range and one should not expect much fall from here but one should not expect much upside as well, target of Rs 1,000-1,050 can always be expected in next six months on the stock.

Latha: Which are the numbers that stood out for you?

A: The kind of performance that we have seen from Linc Pen is stupendous. For Q4, they have crossed Rs 100-105 crore turnover and if I compare this company with Cello Pens -- Cello Pens have a 33 percent market share and French stationary major BIC were holding 75 percent stake, they have raised their stake to 100 percent in Cello Pen by paying Rs 540 crore. That means the valuation of Cello Pen is Rs 2,160 crore. Cello Pen is controlling 33 percent market with a topline of Rs 600 crore.

Linc Pen will be having an -- or they had a turnover of Rs 350 crore for this FY16 if I take a comparable figures and they have a market share of maybe about 18-19 percent if you take by the volume, Rs 600 crore vis-a-vis this Rs 350 crore and the marketcap of Linc Pen is at Rs 277-280 crore and it is virtually a debt free company and the kind of growth, which we have seen in the performance of the company has been very good.

We can always take the case of Asahi Songwon, if you see the dyes and pigments, there are two companies which have posted the numbers day before Clariant Chemicals posted the numbers and now Asahi Songwon that means it is indicating -- on March 30, I said that dyes and dye intermediates and pigments are all going to do quite well. Asahi Songwon confirms that the kind of growth they have shown in their margin, topline grew by about 36 percent but operating profit margins grew by about 80 percent. This is a pigment player with Rs 11,500 tonne per anum capacity. Clariant and DIC India -- two multinational companies are holding 12 percent stake in Asahi Songwon. That company has posted very good numbers.

Zee Media -- it is a big turnaround in the print and the TV business has shown a good growth in the EBIT margin.

One can take a call on Ahluwalia Contracts, again shown a growth of about 40 percent in their margins. So these are the few companies, which have posted good Q4 numbers in the last 12 hours or so.

Reema: You told us about a couple of stocks that you like in the midcap space, what about something like Jubilant Life which is doing quite well, would you recommend a buy on that or perhaps a Tata Global Beverages which has fallen one percent, the earnings are a bit disappointing but would you use the correction to buy?

A: First, let us take a call on Tata Global. The kind of dull and boring performance, which we have been seeing in terms of the financial performance as well as the share price maybe for last three years and I don’t see any ray of hopes that you are going to see the improvement in the workings.

Predominantly they have Tata Coffee, their subsidiary and even in the tea business, company is not producing anything -- they are nearly a marketer across the globe and when the tea prices starts hardening, obviously the pressure on the margins will be seen and that is what has seen getting reflected in this Q4 numbers also again very dull and boring.

On Jubilant Life, the results are not very exceptional, which they have released yesterday evening and the typical price pattern of this stock is -- it moves to a level of Rs 400-410 and then it starts correcting from there. In fact, this has seen a quite high beta stock. So maybe one should refrain from buying this stock at the current level, maybe one can look to enter in to the stock at Rs 330-325 and look to exit at a level of Rs 375-380.
First Published on May 25, 2016 11:08 am
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