SP Tulsian, sptulsian.com in an interview to CNBC-TV18 shares his rationale behind being bullish on midcap steel stocks like Sarda Energy, Prakash Industries, Sunflag Iron etc. However, he does like JSW Steel from largecap space.
He also talks about why is not bullish on jewellery stocks.
According to him, Advanced Enzyme could still be a stock in the core portfolio.
From the private bank space, he likes Kotak Mahindra Bank, Lakshmi Vilas Bank and RBL Bank. Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Latha Venkatesh on CNBC-TV18. Anuj: First a word on IRB Infra that’s down about 2.5 percent, your thoughts on this stock? A: I have been giving my neutral view on the stock for the simple reason that there are no triggers seen, they keep getting some orders, but if you see the price behaviour of the stock after Q1 numbers, the numbers were not bad, the earnings per share (EPS) was around closer to Rs 4.50. In spite of that you need some fresh trigger and stock having moved in this last maybe 1 month by about maybe Rs 25-30 probably is taking a pause and maybe seeing some kind of profit booking. I don’t have any kind of positive view building upon the stock so would give a neutral view on the stock. Latha: The other day you said that you also are positive on steel stocks, but almost all of them are running and some of them have been running for some time now. What would be your pick in the steel stocks for more juice? A: That’s right in fact sometimes I feel that probably market has not caught the up move which is going to be seen in the steel stocks and the kind of recovery in their realisations, whether you talk of the starting from iron ore to the finished product, whether you talk long products or flat products and see the in between just to give you an example manganese ore which is again an input for making the steel, the company has raised the prices by about 12-15 percent. NMDC iron ore prices have risen by about 22 percent and if you see ferroalloys, they are seeing going in a very big way as an export, so yes going forward if you really take and today only JSW Steel has announced their production the highest ever production in Q2 closer to about 4 million tonne and I won’t be surprised with JSW Steel posting an EPS of closer to about Rs 54-55 for Q2 that means if I extrapolate the same which I don’t see any reason, because minimum import price (MIP) having extended by couple of months so you have the clear visibility seen in Q3 also. So going forward and we have seen the EU anti-dumping duty coming on the flat products that is HR coil and all sort of things. Globally the things are really picking up and the main reason for that that China has stopped aggression for dumping across the globe and that is seen quite positive. So, yes amongst the larger one I have my positive view on JSW Steel, but I go more for the midcap steel players where I see huge kind of upsides seen from here, which can be 30-50 percent and if I want to name some of them it could be Sarda Energy, Prakash Industries, Sunflag Iron they are all really doing quite well. If you take the case of Sarda Energy ferroalloy exporter, Sarda Energy maybe able to post an EPS of Rs 45-50 for FY17. Prakash Industries again having very low debt of Rs 600-700 crore may be able to post an EPS of Rs 6-7, similar is the case with Godavari Power they have commence their minings now. Sunflag Iron & Steel again catering to the defence engineering, they are not purely the steel company they are not making long and flat products. They are making value added products or may be one name come to mind is Kalyani Steel so they are few stocks which are names like Sarda Energy, Prakash Industries, Godavari Power, Kalyani Steel they are all really looking quite good, but only thing that you need to have a time horizon of maybe 3-6 months in which you can expect a gain of about 25-30 percent from the current level.
Anuj: Your thoughts on the space led by of cAban Offshoreourse that’s up 13 percent now? A: A while back you have mentioned that all these stocks go up when the crude starts rising and that is right and in fact, Aban takes a lead in that direction because that’s the largest company who are providing the offshore equipment that is rigs and all sort of things, but you must be very sure that this crude rally is likely to sustain which I don’t think that anybody can talk with the certainty or with the confidence, so I won’t be taking a very bullish call because we have seen that in the past also that things are not very much sustainable, but if you want to the odd counters which I repeatedly recommend that if you want to take a call you look for the odd stocks which are not doing right now well and which have the least debt burden, but they can show a very good turnaround those who are providing more into systemic services or maybe providing maintenance kind of jobs and maybe market sometime is making a lot of mistake. In fact, I heard maybe couple of days I don’t remember on the channel where the Selan Exploration was given as an offshore stock in fact they are more into the oil exploration. But my point is that yes if you want to maybe Aban because things are not looking very great, because of the huge burden in the books of the company though the performance has not been very bad on the consolidated basis, but still if you want maybe two stocks come to my mind - Dolphin Offshore though the first quarter results were not very great, but for FY15-16 they always have their fourth quarter as the best they have lot of receivable claim pending with under the dispute and all that for FY16 they had an EPS of Rs 25 and now share is ruling at a level of about Rs 100 or so that maybe if you want to plunge into though as I have said I won’t advise buying in this sector, but still if you want to then that comes to mind and second is a Duke Offshore. They are more into providing the maintenance kind of services very small company and that can again be looking good, but yes there are many space like Alphageo has risen quite a lot, GOL Offshore have risen a lot, Aban Offshore has been showing a momentum today maybe Global Offshore, so I won’t be taking a plunge in all these stocks. Maybe, these two Dolphin and Duke Offshore if they want to one can buy in the small quantity with a medium term view. Latha: The other set off stocks that have been doing well today are the jewellery stocks, of course, gold prices have touched some 4 months low and separately there is an expectation of pre-festive buying and some buying is expected. Fundamentally, is there anything you like in the jewellery stocks? A: Again you have use the word fundamental, so if I purely go by fundamental, I don’t think that any of the stock qualifies in this category, because if you really see there are so many skeletons in the closet which we don’t know. In fact, suddenly you see the things getting written off by these companies, I am not saying that all are falling in the same category. This festive demand always keeps coming in, but I don’t think that the kind of rise which we see, in fact, I don’t want to name the companies here which have really shown a huge kind of deterioration in their performance or may be in their margin, so this maybe just a momentum play again if you get stuck at the higher level, very difficult to exit but the situation the way the things are all prevailing, the things are not looking good on a fundamental basis for many of these companies, so I will not touch this sector and these stocks. Anuj: Your thoughts on Advanced Enzymes that continues to make new highs of course double since issue price, at Rs 1,864 how would you approach this stock now? A: This was one of my screaming buy recommendations along with Ujjivan Financial and RBL Bank if you recall when the IPO came in, I gave a strong view and then on the day of listing it listed closer to around Rs1,200 and on the day of listing may be at 3:15 we saw the stock correcting also and when you asked me I said that this is the buying time for the stock and if you really go by the business model of the company they are into the enzymes and those enzymes are made for the nutraceuticals and the pharmaceutical grade and about 70-75 percent of their products constituting in this category where you have a high margin and pricing power available to the company. Yes, the stock has risen by about maybe say 50-55 percent in these last 3 months, because the stock got listed, no harm in booking the profit, but if you have a long- term view I think this needs to be in your core portfolio. Anuj: I know it is not in top of your pecking list in terms of private sector banks Kotak and Yes Bank are, but what you expectation out of IndusInd numbers and your thoughts on the stock? A: You are right in saying that, but I may add 2-3 stocks there as well apart from Kotak and Yes Bank and Yes Bank if you recall that was my idea at Rs 600 and I advised profit booking from Rs 1,400 onwards and then this fiasco of the QIP calling off was really seen bad, resulted in a bad reflection.
However, continue to have my positive bias on Kotak Bank, but I have been giving my positive bias on Lakshmi Vilas Bank, RBL Bank and maybe Federal Bank.
Coming specifically on IndusInd Bank, I don’t think that you can doubt about the growth but I don’t honestly see any kind of fresh trigger seen really building up in case of IndusInd Bank, because if really see the stock for maybe last 4-6 months it has been moving in a range, it has never given a kind of upsurge
Anuj: You still have view on this stock, Jamna Auto? A: I think post my recommendation stock has risen by about maybe 60 percent, so obviously you feel shy, you just can’t keep on recommending the stock one way. There many, many such auto ancillary stocks just maybe case in point is Rane Brake Lining. I see experts are now advising buy on that stock which we recommended couple of months back and it has trebled in this last two months, so definitely the stock is looking good Jamna Auto is looking good, but now here on you expect a moderate return of about 20-24 on an annualised basis, but yes and every quarter results will need to be reviewed and that’s a call that stock is not bad but tone down your expectation from here on. or maybe kind of breakout, which is seen generally in case of other stocks, whether they sustain or they don’t sustain is a different case, so maybe if you have an investment to trade in a range in IndusInd Bank probably this is a stock for you, but I don’t think that earnings will either disappoint or it will cheer the market, it will be very much on the expected line and I am not having a negative expectation from the earnings.
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