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Last Updated : Jun 29, 2016 08:15 PM IST | Source: CNBC-TV18

Here's why Tulsian is not upbeat on food, consumption stocks

In an interview with CNBC-TV18, market expert SP Tulsian gave his stocks picks for the day and said that he won‘t be too enthused on food and consumer stocks.

In an interview with CNBC-TV18, market expert SP Tulsian gave his stocks picks for the day and explained why he won’t be too enthused on food and consumption stocks.

Below is the verbatim transcript of SP Tulsian's interview with Anuj Singhal and Sonia Shenoy on CNBC-TV18.

Anuj: Ujjivan is one of the stocks of the day of course it had muted listing. We spoke about it, it was a screaming buy for you, from Rs 400 there was correction that took place after that FII limit being hit and now we are almost back to Rs 400 again. What next for this stock?

A: I may not be taking a fresh investment call at these levels and in fact you are right on the day of listing I termed it as a screaming buy when we saw the share listing just at a nominal premium of Rs 10, because if you see on that day also the comparison with Equitas was putting Ujjivan on a much better parameters on all fundamentals and financials, still the market sometime makes folly in giving a valuation and at that point of time maybe at around Rs 220 it was a screaming buy and the kind of gain which we have seen in this last 2-3 months, but what I feel now that with this monsoon theme and the revival of the this discretionary spending, rural income going up.

All these things are making this stock to move up, but I take this stock trading in a range of probably maybe at about Rs 370-375 to about Rs 410 or so, so if you see the share coming down to a level of maybe Rs 370-375 or if you are a near term trader with a spread of Rs 10, then you can look for a level of Rs 390, but I won’t be advising buying now at the current level because I think the share is ruling at an upper end of the range which I have stated.

Sonia: The other stock which is clearly the stock of the day is DLF, a new 52 week high up 10 percent and big volumes getting traded. In fact, right now I think 3.5 crore shares are being traded on DLF. Do you think the good news is in the price, the stake sale and the fund infusion by the promoter or is there lots more to go?

A: If you see the background, if you see maybe couple of years back the promoters have announced that the company will be reducing their debt to Rs 14,000-14,500 crore, they brought their debt down, I don’t have the exact figure, but they brought their debt down to Rs 17,000-17,500 crore and again we have seen the debt started mounting up in the books of the company.

We have been hearing this asset monetisation plan, the debt reduction plan for last over 3 years and in fact, I recall when they were selling this property at Mumbai, which they sold to Lodhas now we are seeing the Park project being developed by Lodha since then they have been talking this debt reduction, but nothing has happened.

Now if you see the media reports which have come that KP Singh will be infusing about Rs 10,000 crore in the company and there may be a QIP of about Rs 3,000 crore to keep the shareholding of the promoter at 75 percent. If you see the present shareholding is at 75 percent.

Market cap is closer to or maybe at around Rs 40,000 crore so sometime I am unable to understand that if the promoters are thinking of infusing about Rs 10,000 crore in the company they can mop up the entire 25 percent of the listed float, so what will happen to the QIP, what kind of valuations so again I think these are all loose announcements or maybe the brainchild of the few analyst who have been taking this call without connecting the figures of Rs 10,000 crore infusion by the promoter and Rs 3,000 crore by the QIP.

QIP issue is possible, but again if you are making the QIP at a current level of Rs 140 that itself show the hard-pressed at the end of the company, so I won’t be taking too positive on this news flow number one.

Number two if you really see amongst the realty space probably the NCR region is passing through the worst phase in terms of the off take or in terms of the pricing power coming back and even once this realty bills comes in, I don’t think that the NCR developers will really be able to comply with because the kind of delay, the kind of hara-kiri which we have been seeing in those projects are much violated or much loose what we seen in other parts of whether it is Mumbai, Bangalore, Chennai.

So I won’t be playing on this theme purely where one take a bullish call because I have my reservations and apprehensions on the debt reduction. I don’t think that company can really be able to make the company debt free even going forward for next couple of years as well.

Anuj: Any thoughts on some of these food stocks or consumption stocks. We have seen a big rally in some of these names?

A: I won’t be too enthused with this because if you really see the cost benefit analysis. See firstly the employee cost, if you are employing employees in the night shift generally it is taken that 33-50 percent extra payment has to be made, then you see the power cost and third is the security cost because you cannot keep open your shops open depending only on the police protection, so I don’t think that all these shops because we have been talking of Speciality Restaurant, now see the sweetmeat and all that those kind of shop.

I can understand for their fine dining and dining outlets, but not the sweet shops and all that.

Similar is the case with maybe McDonalds you may have one or two outlets if they have say 20 outlets in a city then they may keep open for 2 or 3 outlets, so I don’t think that this should really be seen as a very big positive on a cost benefit analysis.

If you are taking similar means the multiplexes if you recall we have seen in the olden day when Lagaan, Sholay they got release always the night show used to run at the half the ticket rates or maybe the morning show, so I don’t think that cost benefits be really workout and sometimes I am unable to understand that why anyone will go and make the shopping in the mall and all that at the midnight. I can understand for the food outlet, so I won’t be too enthused on this, each company will work out their cost benefit analysis and even if some of them plunges to do so, I don’t think they will really last for a very long time considering the high employee costs, high power cost and high security cost.

Sonia: I know you like a lot of the south based cement stocks, but in particular what about Prism Cement, what would your view be its 10.5 percent higher now?

A: If you see the price behaviour of Prism in spite of they having the cement plant and the tile division both are contributing practically equally to the top line, in spite of this the stock has not seen moving has moved much, in spite of tile and cement sector both are doing well.

So maybe this kind of rise was overdue and maybe this coal auction.

I won’t be saying that procurement of the coal or the successful bidding in the coal auction is the only trigger.

In fact, this was warranted because if you see the similar peers in this space like Binani Industries, Sanghvi Industries, Heidelberg Cement or maybe Saurashtra Cement, Gujarat Sidhee they are all in within that western and central part of India where they operate and in fact all the stocks which have named just now have all risen quite a lot in this, so maybe this rally was expected in line with the peers which we have seen.

Anuj: SKS Micro or Bharat Financial Inclusion any thought on this stock now.

A: Same view which I have expressed on Ujjivan because here also we are seeing the momentum taking place maybe the stock is now trading in a range of about Rs 670-730 or so, so I won’t be taking a plunge because again it is ruling at a higher end and if you take a call in fact compare with the Equitas, Ujjivan and SKS Micro probably this is seen the most expensive with a price to book of maybe 5.5 time and maybe similar is the case on the earnings multiple as well.

Sonia: You have been positive on two wheelers stocks in general over the past 6-9 months. Hero Motocorp is now at Rs 3,160 how does the risk reward look currently?

A: On the expectations on the June sales number, I don’t think that the Hero Moto will be really cheering so much to the market that one can justify this kind of prices, but surprisingly if you go by the May sales numbers also in spite of nothing great seen for the May as well, in spite of that the share has been holding for maybe last couple of months, it has risen from Rs 2,800 and let’s not forget that there has been ex-dividend also element of about Rs 80-90 having taken place in the stock, so I am not keeping very positive view if you go on a relative basis probably I am holding positive view on TVS Motor because the stock having corrected post flat Q4 numbers or maybe mildly dull Q4 numbers, but post that we have seen very good numbers seen having coming from TVS for the month of May and similar kind of pattern is seen for the June month also.

So maybe going forward from hereon I think maybe Hero Moto may not be able to give a return of about 5-6 percent in next couple of weeks post the monthly sales numbers which will get release day after tomorrow, while that kind of return can be seen from TVS Motor of about 5-6 percent.

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First Published on Jun 29, 2016 08:14 pm
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