SP Tulsian's view on Adani Port, Coffee Day, MTNL

Anuj: First a word on Adani Port that’s the biggest index gainer right now, 4 percent higher right now. How would you approach this one?A: Actually, if you see the performance of this stock, this has been a big underperformer may be for last 3-4 months, in spite of its inclusion in Nifty and BSE Sensex. But for this series from April onwards, the things have started improving and now may be this has improved by about may be about 20 percent in this last one month on the share price and when you talk to the close sources the Q4 numbers are expected to be quite good because there has been good amount of handling at the port and all sort of things and apart from that the valuations are also not looking too stretched because when you compare with the Gujarat Pipavav Port and Adani Port, no doubt that the GPPL is a very small player as compare to Adani Port, but on the valuation front also and apart from this renewed buying interest having come in the stock in this month of April also goes well in favour of the stock. Anuj: Any call on Alembic Pharma, if you track it?A: This stock is definitely good, but market has been shown excellent numbers by the company on the Q2 and Q3, so may be if you compare it with on Q2 and Q3 you may get disappointment, but otherwise the numbers are looking good.Sonia: I want to talk to you about some of the stocks that have been hitting new highs and one of them is SKS Microfinance its advance towards Rs 600, so fresh 52-week high and it’s been in a so much actions after the success of the Equitas initial public offering (IPO). How would you approach that stock now?A: Microfinance sector is definitely looking very hot, but one should not forget that we have seen Equitas getting added into this and then next week or may be tomorrow Ujjivan Financial is opening the issue and if you go by the other small finance bank, may be the 10 licences having issued, may be 4-5 companies can tap the capital market, but going by the valuation parameter the price-to-book for SKS Micro is quite expensive at 5 times. I am not saying that one should not look for the stock, but may be at the current price this is looking expensive, when you compare it with may be Equitas or may be with Ujjivan probably they are ruling at a price-to-book of Equitas is ruling at a price-to-book of may be 2.4, Ujjivan if I take this at the upper band it is ruling at a price-to-book of may be 1.7-1.8 and even if you add the grey market premium it is working out to be at about 2.1-2.2, so one should not be too gung-ho because may be the trading momentum which we have been seeing more in SKS Microfinance has taken the stock to reach to these valuations. The fundamentals are definitely has improved, but the stock is ruling quite expensive and once the choices are available in the microfinance space probably these prices may not sustain at these levels.Sonia: We all end up paying like what Rs 100-200 for a cup of coffee from the guys like Coffee Day and Starbucks that’s where they are making all their margins, I guess, but why is the stock up 9 percent today?A: Honestly, I don’t know any serious reason for that because if you purely take a fundamental call, in fact, both the Starbucks and the Coffee Day both seem have been struggling and the kind of valuations and the kind of performance which we have seen Coffee Day Enterprise after its listing on the stock exchanges has not given any kind of return, so there has to be some kind of news but that news is not known, so I won’t be able to comment.Anuj: Any call on NCC and the way its rally?A: The talk which has been going on that Maharashtra or especially the Mumbai are going to see lot of contracts getting awarded whether you talk of coastal road or may be the Navi Mumbai Airport or may be the Trans Harbour Link and in fact if you see the six contractors having blacklisted and the proceedings likely to get initiated against them, that is giving a good chance to NCC because I have talked to a couple of people those who are been in this line, so they are quite bullish because if you see three of the contracts which have been shortlisted in which the NCC was also there, in one of them JKumar was there and JKumar name has come in that shady contractor’s name of those six contractors, so that could be the only reason for the stock to move up because it has been doing well may be some last couple of days or so.Anuj: Two spaces where we have seen big buzz today. One is drilling stocks that Varinder mentioned, led by Aban Offshore, Dolphin Offshore, Jindal Drilling, all the oil ancillary which are gaining ground. What do you make of that big rally and other being MTNL. I am sure you would have heard the management interview. What did you make of that? A dead stock, but after a long time, we have seen a bit of life in that one.A: First coming on MTNL, I have heard the management, but he management commentary was too confusing and with no directions having given. I honestly do not see any kind of respite coming in from MTNL because if you see the management, there have been screaming on the spectrum charges having paid, that has been the case with all the telecom operators. Nothing too special about MTNL. So what my point is that the wage bill or this employee cost is so high that it is difficult for the company to really come out of or show any kind of credible performance. That is number one.Number two, coming on the oil exploration stocks, which you have referred, Aban and Dolphin, I am not in fact, Selan Exploration is more into the oil exploration, that is not into the support services and all that, but I am quite positive on these stocks, because you do not expect that the oil exploration will stop. Maybe the contracts of the rigs and all the support services has to get renewed and if the crude is seen having settled at about USD 40, though we keep getting the comment that the moment we see some softness coming in the crude, we start again hearing that it will fall to USD 20 and also sort of things. But, I think that maybe the value buying seen after all these stocks having corrected so much and maybe the value seen emerging again after the contract renewals which we will be seeing of the support services equipments as well as the rigs happening in the time to come.Sonia: What would you recommend investors to do with the Ujjivan IPO tomorrow?A: If you see the fundamentals, I think the fundamentals are looking better than Equitas because when Equitas went public and when you compare it with the financials of the Ujjivan, Ujjivan has much better because if first I go by the FY16 EPS, it is likely to be at about Rs 16.50. So, that translates into a P/E multiple of 13 times against Equitas now ruling at 23 times. And if you see the price to book also on a pre-issue, the price to book is at 1.75 times and the post issue, it will be at 1.58 times. But mind it that you will not get the listing to see at Rs 210 even if I take the upper band at which the issue is being made. Obviously the issue will get listed at Rs 260 and all that. So, even if you compare that with Equitas, Equitas is now ruling at a P/E multiple of 23 with a price to book of closer to about 2.4-2.5 times. So, maybe by expected they are listing at about Rs 250-255, still Ujjivan holds the good potential. But my point is here, that in Equitas we have seen the retail category just getting subscribed by 1.5 times. Probably that may not be the case here. I may see good response coming in the retail category because they think that they have lost an opportunity in the Equitas. So, still in that category, you may see the good potential for the retail investors to apply in the retail category to get the shares better allotment. But yes, on pure fundamentals, Ujjivan qualifies for investments by the investors.Anuj: I remember at Rs 30 you had said that risk-reward was quite good in Amtek Auto. At Rs 43 would you still carry the same view, would you say that it’s still a stock that can be bought?A: In fact, I have that view in fact for all the Amtek Auto group stocks, whether you take a call on Metalyst Forging or may be Castex Technology or may be Amtek Auto, because the debt reduction plan is going to happen. You cannot expect that the company will continue with Rs 17,000 crore debt on a consolidated basis and the banks and lenders will allow them to go on like that and the company has in the past appointed an investment banker to find out the buyer for their own overseas assets which can fetch them about Rs 5,000-7,000 crore and once that happens all the effect of that will be seen reflecting into all the group companies whether you talk of JMT Auto, Metalyst Forging, Castex Technology, Amtek Auto, so yes I am continuing to have the positive view on the stock with a time horizon of about six months.Sonia: Any stocks that you want to recommend investors to buy now, if you have one or two names on your list?A: May be cement space looks good again and again coming back on the southern based cement stocks may be like NCL Industries and Panyam Cement and if you come from the western region you have Century Textile and may be southern region you have Kesoram because Century Textile is due to declare its results on 3 May and I am expecting that probably because for the first three quarters they had losses and their cement division is reported to be doing quite well and Q4 is expected to be with bottom line in black with profit after tax (PAT) of closer to about Rs 45 crore, so these are the stocks mainly the cement stock, mid-size cement stocks can be the theme for the next couple of weeks or so.