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Last Updated : Oct 19, 2016 11:04 AM IST | Source: CNBC-TV18

Top trading bets from SP Tulsian

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his reading and outlook on the market and also gave recommendations on various stocks.

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his reading and outlook on the market and also gave recommendations on various stocks.

Below is the transcript of SP Tulsian's interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: What are your thoughts on Havells? Were you disappointed with the numbers?

A: I will not call it as disappointment, but the numbers are definitely flat because on a sequential basis, there has been no growth or maybe the market was expecting the company to grow quite a bit from here on.

However, the company probably is looking to deploy the cash available with them. Right now, they have about Rs 1,300-1,400 crore and after the exit from Sylvania, they are probably looking for new avenues and there may be some kind of pause or some kind of stagnation till the cash gets utilised by the company. So maybe for the current quarter also, that is Q3, I think the results are going to remain on the expected line.

The other analysis is that the share has run up a lot on this news of Sylvania exiting, which in fact was a very positive news. You do not have much upside or a fresh trigger which can make the shares to move from here on. So, definitely it will see profit booking because of the flat results which I will not call as a disappointment. Maybe the expectations have not been met, but the results are definitely seen flat. So, maybe neutral view on the stock.

Sonia: What about Endurance Technologies? The street is expecting a good listing from this one. But many people are even talking about buying the stock post listing gains. What would your advice be?

A: You need to take a ballpark what could be the listing. If I take a listing maybe at anywhere between Rs 530 and Rs 550 -- what I do not like about the company is that if you go by the last four four fiscal results, the company has posted a topline growth of 8 percent compounded annual growth rate (CAGR) and the bottomline growth of 12 percent CAGR. While all the auto ancillary companies have performed very well. I will not call it as a tiny auto ancillary, this has a topline of over Rs 5,000 crore. But if I go by purely Q1 numbers of FY17 where the raw material cost has fell by about a couple of percentage and in spite of that, the earnings before interest, taxes, depreciation and amortisation (EBITDA) margin has been seen constant at 13.5 percent, which was for whole of FY16 or even for last four years.

So the growth part is seen missing. I do not know whether the 7-8 plants which they have abroad in Europe, those are not -- because unless and until you carry out the result analysis after the results, you do not have much comfort. So, maybe these big auto ancillaries -- what is happening now is that market is very gung ho on all the auto ancillary stocks. But in case of the smaller ones where the market cap is anywhere between Rs 100 and Rs 500 crore, market is giving more valuations or maybe higher multiple to them. While this company may not have that kind of things, this will be a very big auto ancillary stock. So I do not know whether at 22 because if I take expected listing at Rs 530, share translates at multiple of somewhere around 22-23. So, whether you have any kind of growth or upside seen from there, I have my doubts, because the growth is very important, which is seen missing.

Q1 numbers were a bit disappointed because of the flat results or maybe because of the shrinkage in the EBITDA margin by about a couple of percentage, which at least should have reflected. So, I am just keeping my reservations. I am not saying that I am keeping my negative stance, but at Rs 530-550, I would find the stock to be fully priced. Maybe at a level of Rs 500-510, I can give a look to the share.

Sonia: I wanted to ask you about the non-banking finance companies (NBFCs) because yesterday almost all of them were sitting at 52-week highs, whether it is Dewan Housing Finance Corporation (DHFL), L&T Finance, LIC Housing. Would you recommend buying fresh into any of these names?

A: There are many. I would recommend buying into Bajaj Finance and Ujjivan Financial Services because two are looking very good. Maybe one can add Muthoot Finance and Manappuram Finance also.

On a lighter note, what I am now looking for Bajaj Finance is that results are expected and I will not be surprised to see a growth of anywhere 45-50 percent on a year-on-year (Y-o-Y) basis. In fact, I am waiting for the trigger also where Bajaj Finance now has a market cap of Rs 60,000 crore and Bajaj Auto has a market cap of Rs 80,000 crore. So, I am probably taking a time call that when Bajaj Finance can surpass in terms of market capitalisation over Bajaj Auto.

So, I am expecting a growth of 33 percent and I will not be surprised to see that happening in the next one year. I am not saying that I am not positive on Bajaj Auto, but definitely, the kind of positive bias building up in NBFC will reinforce my view on this market cap factor. So, yes, I am keeping a positive stance on Bajaj Finance, Ujjivan, Manappuram, Muthoot Finance and there are many more housing finance companies, but as of now I am purely going on the NBFC theme.

Sonia: A very interesting bunch of stocks coming out with numbers today. You have RBL Bank, there is Tata Coffee, there is Hindustan Zinc, anything from the list of companies today that you like?

A: Keeping an eye on RBL Bank because this is will be the maiden quarterly numbers post public issue. So, expecting a good growth to be posted by the bank, as such, I am keeping a positive on the stock.

On Hindustan Zinc also, we have seen a sharp surge in zinc prices and that is going to get reflected into the Q2 numbers. If you see the other lead recycle companies like Nile and maybe other two or three players, they have all run up quite a lot and actually the zinc prices have seen a very good rise in this Q2. So I am expecting good numbers to come in from that company also. So, both the results will be interesting to watch for.

Sonia: Would you buy the argument that CLSA is putting out? They were downbeat on Bharat Heavy Electricals (BHEL) for a long time, but now they have gone ahead and upgraded it to a buy. What would you do with this stock at Rs 140?

A: I have not seen much recovery in the capital goods seen happening and in fact, if you see the competition now seen coming into the BHEL because the numbers were not very great for Q1. Maybe one can wait to see the Q2 numbers. If you have a long-term horizon then probably after Q2 numbers, one can look to buy, maybe Rs 5 plus-minus, but I do not think that one can look to buy the stock at the current level for the medium-term or maybe from a short-term point of view.

First Published on Oct 19, 2016 09:23 am