Here are some top trading ideas from SP Tulsian

In an interview to CNBC-TV18’s Latha Venkatesh and Sonia Shenoy, SP Tulsian of sptulsian.com spoke on the market fundamentals and gave his views on specific stocks and sectors.Below is the verbatim transcript of SP Tulsian’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: Some good numbers coming in from the midcap space, the likes of GRUH Finance, CRISIL and Mindtree. Anything that caught your attention that one can buy into now? A: I don’t know whether I will really be calling CRISIL as a great number because they seem to be very much on the expected lines and they are showing the normal growth. Yes, I agree that GRUH Finance has shown good numbers but if you go by the valuations, operating profit has definitely risen to Rs 125 crore on year-on-year (YoY). If you see Q4 number of GRUH Finance, they are always best and if you take the Q4 Rs 105 against Rs 125 crore operating profit for this quarter, that translates into a 20 percent growth on the PBT level and the PAT level. So, I don’t think again that look into the valuations you need to really go for the stock when the EPS is at Rs 7, it is ruling at a PE multiple of very rich PE multiple of a 35-36. If you have a 20 percent growth coming from any company, I don’t see any reason of giving a PE multiple of beyond 25. Similar is the case with Mindtree also. They have shown good numbers but again probably IT can take a lead because TCS and Infosys have really shown good numbers. So I am little positive on Mindtree but not on other two i.e. CRISIL and GRUH Finance.Latha: Also wanted to ask you about Muthoot Finance, did you take a look at those numbers? A: No, I have not seen those numbers. Latha: There were a bunch of midcap stocks that have come over the week. We had stocks like Bharat Seats and such like also give their numbers, those were disappointing. Of that entire lot of mid and smallcap numbers that we have got over the week, did anything stand out for your? A: I don’t think that the midcap, smallcap numbers have really started yet pouring in but since you have referred to Bharat Seats, I think that is a disastrous number. When you compare the company with Harita Seating which has been showing such a great performance, similar company, peer group company into the seating space and TVS Group company, they are showing an EPS probably for FY16 closer to about Rs 24-25 consolidated while you see Bharat Seats struggling in spite of having Maruti business and all that. So, I am not impressed at all with the numbers but not significantly any positive numbers have really been seen from mid and smallcap. Sonia: The biggest Nifty gainer at least in pre-opening today is HDFC and as you would know Standard Life is now planning an IPO. We just spoke to Keki Mistry a while back; he said valuations of about Rs 23,000-24,000 crore are not unreasonable. How would you approach that space now? A: I have heard Keki Mistry saying that but if you go by the PAT numbers, take FY16 PAT of Rs 818 crore and add the two years expected growth of 15 percent, maybe Rs 1,050-1,080 crore would be the FY18 PAT of the company because the management has indicated that maybe by this calendar year and that means at that point of time people will start factoring in FY18 PAT numbers which I expected to be Rs 1,080 crore, I don’t think that you can really give a valuation or a PE multiple of beyond 90 in the primary market. So, that translates to a valuation of anywhere between Rs 20,000-21,000 crore. If you go by the price to book also because this will be an offer for sale, HDFC which is holding closer to 61.63 percent stake, will reduce it by 10 percent so nothing would get added to the book value. So, on a price to book basis also, on a multiple of 4 also looks stretched. So, maybe a valuation of Rs 19,000-20,000 crore should be kept in mind while taking a call on the valuation because you have two comparative plays available. One is Max, if you see Max has a life insurance premium of -- gross premium of about Rs 12,000 crore while this company has Rs 16,000-16,500 crore. On the other end you have Bajaj FinServe also which has a life insurance premium of Rs 6,000 crore again on a consolidated basis though Bajaj FinServe is a promoter of Bajaj Finance. However, as an investment on a consolidated basis, they do have LIC Life Insurance business also. So, you have to compare the valuation of HDFC Life with the valuation of Max and Bajaj FinServe and give maybe 15 percent premium because of the parentage of HDFC and all sort of things. So, I won’t be subscribing to a valuation of beyond Rs 20,000 crore taking FY18 as the estimated PAT of Rs 1,080 crore for HDFC Life.   Latha: J Kumar Infraprojects and some such companies are likely to get the MMRDA award of the metro. It is not yet a done deal but it looks like very imminent at this point in time. Is there anything in the construction space now that attracts you, J Kumar Infraprojects included? A: All these standalone pure EPC players are doing quite good. Take the case of Simplex Infrastructures and J Kumar Infraprojects, both are seen getting maybe contracts of about Rs 350-400 crore for metro. However, let us not forget that we have the flow of contracts which will keep coming in from Maharashtra government more specially in the Mumbai city. Then we will be having probably in next three to four months or maximum six months we will be having the coastal road contracts getting awarded which is about Rs 10,000 crore and definitely Simplex Infrastructures and J Kumar Infraprojects again holds good chances of bagging orders of closer to about Rs 2,500 crore each of them. So, I am keeping positive view on all these things, maybe one can add the ARSS Infra who has been continuously receiving the orders. NCC also because that is what I say, in metro you have two-three bidders having identified for about Rs 350-400 crore with Simplex Infrastructures, J Kumar Infraprojects and NCC, three names are coming up for award of contract of Rs 350-400 crore. However, I am keeping an eye on maybe Mumbai Airport and the coastal road projects which I have said of Rs 10,000 crore which also will get released in next six months or so and these three companies have good chances. So, maybe in the pecking order, I will go with J Kumar Infraprojects then Simplex Infrastructures and then NCC.Sonia: Your top space to be in for the last fortnight has been cement. You have been recommending names like Heidelberg Cement which are now sitting at fresh highs. For this week, for the rest of the week, anything fresh that you would recommend? A: My preferred pick has been sugar followed by cement. However, if you ask me to keep an eye for next week to 14 days or maybe week to fortnight, continue to be on sugar because if you have seen the ISMA production, these are having released by the ISMA till April 15, the production is 243.40 lakh tonne on all India basis which is 21.24 lakh tonne shorter than what we compare it with the previous year in the same period. So, this is going to be a big shortage seen and I don’t think that if you add 4.5 lakh tonne production expected as indicated by ISMA, the production is likely to be anywhere between 248-249 lakh tonne which is way below the estimates of 255-260 lakh tonne. So, I think the way the prices are hardening, now Bihar is selling a Rs 36 per kilogram, UP is selling Rs 35.20-35.30 so I think the kind of hardening, the kind of inventory gain which we will be seeing from these UP based sugar mills, will be phenomenal in next four to six months. So, my order will be sugar followed by cement.