In an interview to SP Tulsian, sptulsian.com tells us why he is positive on cement stocks, especially Andhra based companies and also Torrent Pharma.
In an interview to SP Tulsian, sptulsian.com tells us why he is positive on cement stocks, especially Andhra-based companies and also Torrent Pharma. He also shares his views on why one cannot maintain an outperformance on OMCs for the long-term but still be positive on them for a gain of 5 percent in the next series.
Below is the verbatim transcript of SP Tulsian’s interview to Sonia Shenoy and Anuj Singhal on CNBC-TV18.
Sonia: Some of these Andhra based cement companies could benefit because prices are trending up. What is the sense you are getting about the stocks. You track many of them and as a long term opportunity do you see any value here?
A: Actually Andhra pocket or maybe Andhra and Karnataka because of the glut in the supply in that region. In fact I have not seen much uptick happening in the cement prices in the last couple of months, I am talking prior to monsoon. And that is the reason if you take a call on all the Andhra cement based stocks they have not posted good numbers whether you talk of NCL Industries, Keerthi Industries of maybe Kesoram or there are many, six or seven players from that space, Deccan Cement they have not posted that kind of robust numbers what we have seen from the other cement countries.
So, maybe I see this as a concentrated move which has not happened in this last couple of months which will definitely be seen positive for the companies going forward from here on. So, I am keeping a positive bias because if you see post Q1 numbers because of this all the stocks have corrected to a significant level whether as I said NCL, Panyam Cement, Keerthi Industries, Deccan Cement, Kesoram Industries and in fact this increase of the cement prices and because south is not now seeing - or one can say that there is a halt of the monsoon in the southern region as well Karnataka and Andhra that is giving an opportunity for the construction activity also to start taking up in this interim period or in this dry period.
So, yes, this is positive for all the cement company and if you see all of them the names which are given, four to five names they have all been ruling at an Enterprise Value (EV) of anywhere between USD 50-65 per tonne which are really seen to be very reasonable or very compelling valuations. So, yes I am keeping positive stance on cement. In fact that is what I have been mentioning for the last couple of weeks also when you see some of the biggies ruling at an EV of closer to Rs 190, Ambuja Cements, ruling at USD 190-195, UltraTech Cement ruling at USD 205-210 I am not saying that one can compare both these Andhra based companies with these biggies one but still the valuation differential will get counted. So, maybe in the current scenario because the prices have started hardening in the Andhra belt and the valuations at which these stocks are ruling I am keeping a positive view on these stocks.
Anuj: The stock of the moment is Torrent Pharma, that has corrected quite sharply intra-day. Your call on this stock?
A: I am keeping positive stance on this stock but if you see the run up which we seen in this stock price, in this last three or four days probably profit booking has come. In fact reason for its up move was not known and reason for the fall for today is not known but keeping a positive stance on this stock.
Sonia: For the long term investor any opportunity in Oil marketing companies?
A: I don't think you can take a long term call on these stocks because after having seen moved in this range first we should allow the - both the stocks Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) to go ex-bonus which will happen in the middle of September and then again we need to take a renewed call. But I don't think one can really keep a very outperformer call on these stocks from a long term or from a medium term point of view.
However, looking to the present range both the stocks looks good buy because this HPCL having corrected by about five percent post Q1 numbers, is giving an entry point. BPCL is yet to announce the numbers but they will also be on the expected line where inventory gain of closer to about USD 2 per barrel will be seen. So, overall I am keeping a positive stance for a gain of about five percent in the next series of five weeks.
Anuj: What next, I remember you had said that two 20 percent down circuit and two 10 percent down circuit and after that maybe you will look at that. What have you made of today's move, at 10 percent circuit down, 1 crore block deal moving into the green and now back circuit down?
A: Actually if you really ask me probably the poison is out of this stock because if you really see we have to see how much delivery gets marked because we have seen a volume of 10 crore plus on NSE, BSE put together. We don't know maybe by the close it will be 11-11.5 or 12 crore, I don't know exactly. So, if the delivery gets marked of 2 crore shares because if you recall the selling is of 2 crore shares which are seen hard-pressed and if that got absorbed whether by block deal or by market or maybe by the informed circles and by the conference call which we have seen yesterday from the company that was quite reassuring that yes, the supply chain is all being streamlined and things will all get looked into and if you really see the seriousness because this is what I have been maintaining because there is no - what you call - unusual steps having taken by the target the purchaser because if they want to get rid of that consignment and if they have taken a wrong stand then it is a different case.
But suppose even if the things have happened wrong at the companies end and if they get that corrected in the future going forward that will be seen quite positive because the foreign buyers like J. C. Penney, Bed & Bath, Wal-Mart they all need huge quantity which they cannot immediately shift to any other producer and the price having corrected, in fact now I see, this is what I have been maintaining on the first day itself that two 20 percent and two 10 percent and then definitely look to buy the stock because you have seen the valuations reach to a very attractive levels and I won't be surprised to see the stocks once this delivery of 2-2.5 crore having got absorbed today we will get to know those delivery figure in the evening at 5 o'clock then this is very healthy for the stock and I won't be surprised to see the stock going up from here. Let us not take a call on today's behaviour of lower circuit hitting in the morning and then again lower circuit being hit now but I am keeping a positive stance on the stock purely on the fundamental and the con-call which we have seen from the company yesterday.
Anuj: A word on Manappuram Finance. Has it corrected enough or would you expect more correction before buying?
A: I don't think that more correction is likely because we always see these kind of things happening when the market corrected which we have seen today the F&O losses and for that reason sometimes you do get the profit booking and the losses liquidations also for that you have to sell some cash shares and that is what is happening in Muthoot and Manappuram the kind of run up also we have seen the profit booking was warranted. But I don't think the further correction is likely honestly seen in Manappuram General Finance from here.
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