M&M, pharma stocks, Mahanagar Gas: See SP Tulsian's top picks

In an interview with CNBC-TV18, market expert, SP Tulsian discussed his stock picks for the day and talked about the listing of Mahanagar Gas on the Indian bourse. Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18. Anuj: I remember you were quite bullish on M&M two or three months back and then we had that big rally on the stock. How would you look at these numbers, the stock in fact as we speak is rallying 1.5 percent? A: Excellent number from tractor, I don’t think that anyone has ever imagine 30,000 because if you recall I have been giving it at about 25,000-26,000 because if you see in the month of May it was 23,000, so I think 30,000 excellent coming on the PV sales, it is optically one may say that these are mildly disappointed maybe by 1,000 or 1,500 vehicles, but looking to the ban and all that and the migration or the power engine adjustments which we have seen from the company, they have lost the sales for maybe about 15 days to a month and naturally lower off take, but if you really see the overall performance from the PV and the excellent number from tractor sales, I think these numbers are really remarkable and that is probably the reason that share is almost hitting to or reaching towards 52 week high. Anuj: The stock of the week has been Dr Reddy’s that’s up 10 percent now. We are talking about this at Rs 2,700 of course it had great risk reward, but at Rs 3,500 do you think there is still value in the stock? A: I don’t think that why one should chase the momentum because if you recall for the one week two-three times I have been saying that now this month is going to be for the bigger pharma stock. You have missed the bus on Dr Reddy’s, look for other stocks like Strides Shasun or like Aurobindo Pharma, Glenmark, Wockhardt or maybe Lupin. You are getting lot of opportunities, so I don’t think that there is any need to chase the momentum in case of Dr Reddy’s life doesn’t end with Dr Reddy’s. Sonia: The one theme that’s played out very well is now is a tractor sales, not just for M&M but for Escorts what a great number this time. Do you think Escorts can give you better returns then it has already? A: I don’t think so, because just to give you the comparable figures for Escorts in the same month that is June 2015 we had seen a sales of 6,200 from Escorts and this month we have seen 6,900 that is increase of about 10 percent, what was the sale performance of Mahindra & Mahindra 24,000 and 30,000 I am comparing only month on month (MoM) year on year (YoY) that means monthly sales YoY, so Mahindra & Mahindra has given a growth of 22 percent again Escorts given a growth of about 10 percent and if you really see the price of Escorts are already ruling quite high and I don’t think that this kind of valuations justifies, because the same type of sales numbers cannot get extrapolated for Escorts and Mahindra & Mahindra for the month of August and September. Again the sales will pick up in the month of November when the Rabi season will start, so I won’t be keeping a positive bias on Escort from these levels. Anuj: And what about KPIT Tech a bit of a Déjà vu here again profit warning and the stock falling 13-14 percent. How would you approach this one now? A: If you have this kind of things then obviously and as such if you really see this IT stocks are not very much in focus. When this profit warning came in and on making a comparison study, we have given a positive bias on Trigyn Tech, in fact, that looks quite good, I am just giving a comparable picture between both, but keeping a negative view on KPIT. Anuj: For retail what’s the advice should we wait for more correction, more dip to buy or is it a buy at current levels? A: If you recall we discussed yesterday that Rs 550 looks the optimistic price on the listing day where one can exit, but I don’t think that below Rs 520, I am a buyer at Rs 520 because if you now take a comparative call on the IGL and Mahanagar Gas Limited the quarter 1 results for both the companies will be out because Mahanagar Gas has also listed now, so first quarter’s results will all be out and if you really see on the earnings per share (EPS) basis because even IGL has all been showing the flat performance, so if they will show an EPS of closer to Rs 8, Mahanagar Gas will show an EPS of maybe Rs 8.50 and if you go by the lower equity base, lower market cap, good promoter holding and even the joint holding of the British Gas and Gail, 10 percent is obviously held by the Maharashtra government also, so all these things will start going in favour of the Mahanagar Gas Limited and generally what happens, you have mentioned about the HNI because all the HNI applications are made on the leverage positions and they have to compulsorily exit from these positions on the first day of listing itself, because the finances are made to the extent of 95 percent, so this selling pressure is only coming of this. In fact, this reminds me of the similar situation what we have seen in case of Ujjivan where the share has remained subdued for first couple of days, but started moving up and bouncing back from thereafter. So I think Rs 520 looks the base and this is an excellent opportunity to buy purely, because IGL I don’t think that IGL will correct below Rs 590 under the worst case scenario. So even if that happens, Mahanagar Gas Limited has no reason to rule below IGL maybe after one month or so. So if you have a 2-3 months view then probably one can look for a return of 10 percent plus also in the stock, by buying at the current price of Rs 520 with a very minimal downside is seen from here. Anuj: A word on IOC itself up 8 percent and a word on Manappuram General Finance remarkable stock in fact as speak, it seen another day intraday surge, so both on Manappuram and IOC your call? A: Manappuram has come in the new trajectory the Q4 numbers because now this cannot be really called as a gold stock because the kind of diversification they have been making in the consumer finance, home finance and all sort of things, but the momentum has to end at some place and I think that maybe those who will be supposed for some reason if the same growth momentum is not seen in the Q1 numbers then probably the share can see profit booking and can correct from thereon. Coming on IOC, the IOC has always remained laggard when you compare it with BPCL and HPCL, so maybe the differential has really widened so much than that has to get breach at some point of time and if you see HPCL, BPCL for last couple of days also, the stock has shown a good kind of growth, so maybe this is a concentrated up move of maybe last one month of the underperformance of IOC is now seen getting reflected in the upsurge today. Sonia: What about you? At Rs 145 the stock has seen a big run up since March, but is it still worth a buy? A: No, I will not initiate a fresh buy on this because this has already risen and I don’t think that the stock is now seen having any further room for appreciation, momentum can take it but fundamental doesn’t justify. Sonia: Equitas is the other one I wanted to ask you about, you briefly mentioned earlier we were speaking to the management a while back they will be transitioning to a small finance bank by the month of November. What kind of returns do you see for Equitas from here on? A: I express earlier also the small finance bank licence was known that this will come at some point of time and again you have if you want to take a call you have advantages, you have disadvantages. But looking to the growth and penetration which the company will take when the kind of expenses which has to be incurred. I am not going into the deposit benefits. I am not going into regulatory obligations which they have to carry on and comply, but even if you see the kind of competition which all be catching on, though the advantage will remain with them of the tier 2, tier 3, tier 4 cities, but still I feel that at this point of time I don’t think that, because maybe too much of the chasing is happening in the stock, but I don’t think that because you have many other similar ideas in the NBFC space. We have discussed just now about the Manappuram Finance, Muthoot or maybe there are many ideas even in the tier 3 and tier 4 cities, where you want to play, so I won’t be keeping a positive bias because on a relative basis I don’t think the returns can be very high from the current levels, so maybe profit booking is advised at the current level. Anuj: Any thoughts on real estate names, you have been very bullish on Mumbai based stocks, but across the board we have seen good gains, we discussed this and you were talking about Sobha yesterday, but anything that you want to buy at current level? A: Maybe one has to find out some odd ideas, I don’t think the stock which are all very much focussed like Indiabulls Real Estate, HDIL, Sobha, Prestige can really give money, but the two stocks which I like one from the Mumbai space that is DB Realty and second is from the non-Mumbai space that is from Ahmedabad kind of things that is Ashiana Housing, if you really see the performance of Ashiana Housing it is virtually a debt free company and the kind of performance, the execution capability. Similar is the case of DB Realty because their projects in Mumbai at 3 or 4 locations, one at Prabhadevi, Kandivali East, Sahar Airport all of them are picking up quite well with the good amount of construction work progress going on and the kind of debt if you really see in the books are not such so alarming. So I think these two stocks look good from the real estate which have not really come on the focus of the investors. Sonia: You wouldn’t be worry about DB Realty, there have been a lot of issues with its delay in some of its projects for example the DB Ozone project in Dahisar or even the fact that the company has been loss making for so long that wouldn’t worry you. A: That is the reason that share price is ruling at such a low level. Coming on the Dahisar project of DB Ozone, I don’t think because there was some kind of issues I have heard the CEO also of the company saying that there was news that many of them are opting to withdraw the money and all that, but no one is really going for and in fact the delay if you really see, let me be very blunt in saying that that delay is happening even by the Oberoi Realty even if you go and talk to the resident of the Oberoi Splendour where the IITians and IIMs are all staying at least 50 of them employed, they all are dissatisfied, they have all been fighting with Oberoi Realty. So what my point is that these issues with practically with all builder. Similar is the case with Bombay Realty that is Bombay Dyeing at Wadala, you go and check with the 140 occupants those who have been staying in those buildings with each flat is of Rs 10 crore and more, so I don’t think that these are some issues get blown up out of proportion, so I don’t think that Ozone which you have specifically mentioned, but take their case of three towers at Crown, maybe at Sahar Airport and maybe at Kandivali, the completion of the Goregaon project DB Woods the possession of which has already been handed over that is 54 storey two towers, so what my point is that yes the whole process got derailed about couple of years back or maybe now the things are coming back on track. So this is just an idea, I am not saying that this is a screaming buy, but yes if you can keep a view on these stock with a view of about 6-12 months I think it can give a good return.