SP Tulsian's view on ACC Cement, Yes Bank & Dabur

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com spoke about his outlook on the market and specific stocks.Below is the transcript of SP Tulsian’s interview with Sonia Shenoy and Anuj Singhal on CNBC-TV18.Sonia: Cement has been one of your top favourites. But we have had a couple of other good numbers that came in in the last 12-24 hours as well, the likes of Yes Bank. Do you think that the story in cement has played out or would you still advice someone buying into names like ACC now?A: I will still advice buying in ACC because if you just go through the numbers which have been just out for Q1, in fact, the two core segments, power and fuel and the freight cost. In fact, if you see both the segments have not shown any kind of improvement on the relative basis. I am talking quarter-on-quarter (Q-o-Q). In fact, if you see they are all flat. But if you see further efficiency has come in. In raw material, saving of about Rs 58 crore, I am just giving you a sequential on employee cost, saving of about Rs 43 crore. Depreciation saving of about Rs 12 crore and other expenses have reduced by about Rs 42 crore. So, that has given an extra operating profit of about Rs 155 crore which has resulted into the operating profit rising to Rs 290 crore from Rs 125 crore.Now, suppose if the two major costs that is freight and power and fuel, in case of ACC, when you compare it with Ambuja, ACC always have room for further improvement because they can improve upon power and fuel, they can bring it down by about 5 percent and that is possible. So, it seems that company has first tightened their belt on the other expenses maybe by reorganising or reducing the employee costs, other expenses and all that. And that has resulted, the earnings before interest, taxes, depreciation (EBITDA) margin rising to 14.5 percent. And that is one thing and now, the kind of growth which we have been seeing in the cement industry, 6.36 million tonne in this quarter, against 5.82 million tonne year-on-year (Y-o-Y). In fact, I am highly impressed with the quantity growth, the offtake growth of about 7-8 percent which has been projected by the industry will give them the further operating leverages because of the better capacity utilisation. And we need to see the results of Ambuja Cements also which will be out, after market hours in the evening at about six o’clock. So, that is giving all much more comfort that the situation is likely to be seen much better in the cement industry whether you talk of the larger ones or you talk of the midsized cement plants.Anuj: The one pocket which is managing to outperform today is the Mumbai real estate stocks. We had discussed this in the past. You were quite positive in all these real estate names – Indiabulls Real Estate, DB Realty, HDIL. After the news flow, is there temptation to book profit or will you stay put with some of these stocks?A: If you are a near-term investor then you can look to book profits. But after the news flow and which I have said about a week back, and since then if you really take a call on these stocks whether you talk of Indiabulls Real Estate, HDIL or maybe DB Realty, because they three have the larger presence, I am not talking of the other realty players like Ajmera Realty, those who have presence because I do not think that they will be seen much beneficiary. But HDIL and DB Realty seems to be quite attractive even at the current level, because one can add because Indiabulls Real Estate, the kind of performance which we have seen from their Q4 numbers on a consolidated basis, I am not disappointed.One can say that these are the flat results. But the kind of execution capability they have. So, if you have a time horizon of maybe about 3-6 months, probably one can remain invested, because if you see the improvement in the economy to come, which is expected because of the good monsoons, always there is a lag effect of about six months when we see the revival in the real estate industry also happening. And because of all these three companies having good presence in Mumbai, they will be seeing the better sales also going forward maybe post monsoon and all these news flows will be definitely seen advantageous to them.Sonia: A quick word on Dabur’s numbers. The prima facie numbers look good. The margins look slightly better than what we were estimating. How would you read into them?A: Numbers are looking good, but I will not be taking a buy position on the stock because if you really see this, probably the profit booking and the threat to the FMCG companies is continuously looming quite large because if you see the Baba Ramdev having given the target of Rs 10,000 crore, we cannot take that as lightly. He is looking for a 100 percent rise from a Rs 5,000 crore turnover in FY16 to FY17 and that is going to eat away the margin, the big market share of the toothpaste or maybe the FMCG like noodles and all that, but even Dabur, holding a good chunk of items in which they will be facing a direct threat from Patanjali. So, I will be keeping a cautious view and you do not expect that probably for the June quarter, you are going to see the spending increasing because till then, rural spending is not going to get increased because of the drought threat which has been looming large in practically entire part of the country. So, I will not be too enthused, though the results seem to be practically on line.Anuj: A word on the big drag on the market – HDFC. It has somehow been the rank underperformer. It is very unlike HDFC. We normally see buying at lower levels for HDFC. This time around, there has been a complete absence of buying. What do you think is going wrong?A: That has been the case for the last two or three months and in fact, in my view, HDFC is used more as a tool for index management with a lack of buying seen, because whenever we want to have any kind of weakness to be seen in the market, HDFC takes the lead. But if you take today’s situation, all the frontliners have to be blamed, whether you take ICICI Bank, Reliance Industries, ITC or HDFC. So, we cannot solely blame HDFC for today’s carnage, but yes, you are right for the last 2-3 months, HDFC is not seen participating in the market rally.