Here are SP Tulsian's view on sectors like sugar, NBFC

Sonia: ICICI Bank is the big talking point of today. Huge cuts seen in terms of both volume and price action over there. Because of the way the numbers have shaped up do you see the stock getting back to its 52 week lows of 180 thereabouts anytime soon?A: Difficult to give a target of Rs 180 but if you recall on Friday we had a brief session of bull and bear where I had given my bear view on the stock because I don't think you have respite on any front because as I said earlier also that special contingency provisions of 3600 does not mean that you have put an end to the asset deterioration and apart from that if you see the flat advances and even a deposit growth of just meagre four percent and so many other issues involved into it and actually the kind of run up. A week back when the stock moved to a level of 250 I said that the stock price is looking quite dangerous and I won't be surprised to see the share sharply correcting in the new series but it has started happening two days prior to that only because results came on the first day of new series. So, I won't be surprised to see maybe a level of maybe about Rs 210 or so. Difficult to say for about Rs 185 can be seen or not. Because the kind of new buying which has happened maybe they may not come and book the profits entirely because many of them may have held the investment for a longer time but I am keeping a negative stance because you don\\'t have respite on any front from Q4 number seen from the bank.Anuj: The other talking point of the day has been the big rally that we have seen in Shriram Transport Finance. That is now up about 14 percent. Do you think it deserved this kind of rerating from the market that we have seen this kind of big surge in stock?A: I don\\'t think that this deserves this kind of rerating because let me first come on Q4 numbers. The bad debts and provisions have more than doubled from Rs 420 to about Rs 860 crore. That kind of increase we have seen in bad debt and provisioning. And if you see the notes presented by the company 98 percent of that has been booked as bad debts, that is not a provision, mind it. Because if you have a provision then you have chances of recovery. So, maybe if the bad debts have been booked to the extent of 98 percent I don't think there is any kind of revival or recovery to be seen going ahead, number two.Number three, if you see the provisions 29 percent of the interest income has been provided in Q4 and even if you take for whole of FY16 it is at 20 percent of the total interest having earned by the company. I don't think that these kind of provisions or bad debts are made by any non-banking financial company (NBFC). The general thumb rule says that this is anywhere between 10-12 percent of the interest income earned by the company. But maybe the stock was having accumulated prior to the results.If you recall the stock moved from Rs 840 to about Rs 940 and good accumulation seen having happened during that period. So, maybe those strong hands have seen but the only trigger which I could see that Umesh Revankar who was earlier at the helm of the affairs has been elevated. Probably market was not happy with the kind of - I am not prepared to accept the argument that equipment finance because equipment finance provision had already happened if you recall in the Q4 of FY15 and the effect of that has got booked by the company in Q4 of FY15 and that is why for whole of FY16 we have been seeing the quarterly numbers presented by the company on a standalone basis.So, whatever quality deterioration of the equipment finance has to happen has happened last year. So, this is a fresh slippage or fresh - I won\\'t call it as a slippage - I will call it as bad debts because that is what the presented that the bad debt to the extent of 98 percent has been booked by the company. So, I am honestly surprised by these kind of up moves because you may have some kind of upgrades coming in from some institutional investors.Sonia: Do you want to come in on Larsen &T Finance quickly? The topline and bottom-line numbers that we have?A: Net interest Income (NII) looks good, but if you really see the behaviour I don\\'t think people are giving any attention to this NBFC because this seems to have been totally out of focus of the investors. But yes, NII looks good. I am not that impressed with the bottom-line but NII looks good.Anuj: Could profit before tax (PBT) growth of 28 percent be the reason you are seeing this kind of big surge in the stock?A: Possible, because I have not yet gone through the entire break up what you all have but yes, looks like.Anuj: What would be on top of your list in terms of pecking order for some of these NBFCs. We have seen a rally now across the board. M&M Finance, L&T Finance, today Shriram Transport. So many of these stocks, Cholamandalam Investment has rallied. Which of these stocks you like the most?A: Looking to the Chola numbers probably I will go with Chola followed by Bajaj Finance because if you see Shriram Transport and Mahindra & Mahindra Finance, both have seen to have run quite ahead of maybe monsoon expectations and we have discussed on Shriram Transport for a while but now you can add the L&T Finance holding also. Because if you see on a valuation parameter it is ruling maybe on current year\\'s it is ruling at a Price-to-Earnings Ratio (PE) multiple of maybe about 17 times with a price to book of about maybe 3.6 or something like that. So, these things are looking quite good.Sonia: I know you track SML Isuzu, if I remember correctly, is this a stock that you would recommend. The 12 month chart of course the stock has fallen quite a bit, but if you look at last couple of months the run up has been pretty good?A: SML Isuzu always post the best Q4-Q1 numbers and that actually gets translated into their financial working also and Q2-Q3 always seem to be dull and boring. And if I go by the last quarter they had in April 876, May 1,405 and June 1,529. So, maybe if I expect that always May and June are seen to be the best for SML Isuzu but for April they already seem to have achieved more than what they have all been posting. So, yes, these numbers are looking really very good numbers and that will eventually get translated into Q1 working also three months down the line.Anuj: Parrys Sugar that has reported a good net profit. You have been saying that expect record numbers from sugar companies. Do you track Parrys Sugar, a relatively smaller one, any thoughts on this one?A: Actually this is just a trailer of sugar profits. I have said that FY17 will be record profit because of the simple reason. Actually let me first distinguish between Parrys Sugar and the other UP based sugar mills. Generally what happens with Tamil Nadu based sugar mills that whatever they produce, they sell the quantity. They don\\'t carry much inventory, while the UP based sugar mills will be carrying about 75 percent of their production which they produced in this season as an inventory which will get sold in the next five to six months.So, now inventory is valued at less than Rs 30/kg and now sugar is getting sold at Rs 35/kg. So, the kind of profits which they will be booking is going to be phenomenal which has not been seen in the past. So, the four - six UP based sugar mill companies will all be posting the record, FY17 profit. I am not saying that Q4 will not be good, even Q4 on a sequential basis will be posting a growth of about 50 percent to 100 percent or maybe 120 percent.Coming on Parrys Sugar in fact I have to look for the inventory what they have been carrying. I have not been able to analyse the result, but I am not keeping that kind of positive bias. Though on a relative basis UP based sugar mills will enjoy mainly on the pretext of the large inventory which they will be carrying. But yes, overall positive bias but I have not analysed Parrys Sugar yet.Anuj: These stocks have corrected a bit from the highs, Balrampur and couple of other like Dhampur etc from the recent 52 weeks highs. Do you think they can now start fresh round of rally based on the kind of anecdotal evidence that we have on production and price numbers?A: ISMA has just now Indian Sugar Mills Association (ISMA) just now released the production of all India on an all India basis it is 246 lakh tonne as of 30 April. Now, if you take the situation prevailing in Maharashtra, UP, Andhra all the mills have stopped crushing including Karnataka. Now, if you see because of the scorching heat we have seen the recovery also falling in Tamil Nadu as well and may be in next 15-20 days Tamil Nadu crushing will also stop and then may be after that new season which will start after 2-3 months there we will not be going to see a production of more than 2.5 lakh tonne. So if you take the entire production of this season, it won’t be more than 250 lakh tonne and if you want to take a exact call it will be 248.5 lakh tonne because if you just add 2.5 lakh tonne, which I have said that only will come from Tamil Nadu and add to 246 lakh tonne which production all India which ISMA has just an hour back has released this figure, that is going to be seen quite low because the earlier estimate was at 255-260 lakh tonne, which now working out to be at about 248.5-249 lakh tonne and even the next season, won’t be seeing a production of more than 225 lakh tonne because there will be drop of at least may be 8-10 percent overall may be 15 percent in Maharashtra, so I think that we have been talking that yes Parrys Sugar has posted very good numbers having presence in Karnataka, Andhra Pradesh and one mill in Tamil Nadu they have totaled 16,000 TCD, but this is the trigger of ISMA having released this figure of 246 lakh tonne, which has seen this renewed buying interest coming back and mind It that in the last week global prices have started firming up because if you recall on Friday, last one hour we have seen all the sugar stocks having started surging because of the rise seen in the sugar prices on the global market as well.Sonia: The other stock I wanted to talk to you about was Interglobe Aviation (Indigo), despite the earnings coming bang in line with what the company guided for, the stock is down about 5 percent today. Why do you think that is?A: I don’t think that results were really very good because let me just come quickly see the EBITDA, it has been continuously falling 22 percent YoY, 22.36 percent on a sequential basis it is 23 percent and it fell to sub 20 percent. Now if you see the overall this is in spite of a drop in the fuel oil in the fuel charges and that fuel charges fell by about more than 210 basis point on QoQ basis and more than 600 basis point on a YoY basis, so I don’t think that the guidance of the company will really be helping the investors here in this case number one. Number two if you come on the dividend policy, they have been saying that yes 93.3 percent has been paid as a dividend, but if you just bifurcate the working of the company in two parts that means when they went public in the month of October up to 30 September promoters can take credit by taking the entire amount having earned by the company as dividend, but if you see the dividend, which they have paid now Rs 15 final dividend including dividend distribution tax works to about Rs 650 crore and that translates to 53 percent of the second half PAT. So the kind of guidance given by the company or I won’t say that guidance, the kind of hint given by the company that they have always been very generous they won’t be requiring any money that dividend payout will be very high probably has disappointed the market, but apart from that if you really see, may be company has tried to devise a new method EBITDAR they want to exclude the rental income also. So I don’t think that that will really go well with the market because practically on all the front, if you see lending fees, aircraft rental on all fronts the costs have seen increasing and this is mind it in spite of the plant load factor seen highest YoY and QoQ plant load factor of 85.1 against sequentially 84.6 and YoY 82.8, so I think on all parameters the company has disappointed and probably we are seeing the profit booking in the stock.