Tulsian tells: Parag Milk's stellar listing and stock picks

In an interview with CNBC-TV18, market expert SP Tulsian talked on Parag Milk's listing on the bourse and gave his stock picks for the day.Below is the verbatim transcript of SP Tulsian interview with Sonia Shenoy and Nigel D’Souza on CNBC-TV18. Sonia: I wanted to start up with one of the stocks of the day which is the new listing Parag Milk, a fabulous debut. It still up about 15 percent what does the retail investor do now with this one? A: If you go by purely fundamentals and if you have heard the management giving a guidance of 25 percent on their top line and bottom line for next 2-3 years, so that translates into may be an earnings per share (EPS) of closer to about Rs 7 for FY17 I am referring, because FY16 results will be declared on the old equity which will be of about 69 crore, which will get raised to about 83 crore because the proposed initial public offering (IPO) had the element of fresh issuance as well as offer for sale (OFS) both. So if I take that 83 crore as the equity, the expected profit after tax (PAT) for FY17 works out at about may be Rs 55-56 crore which translates into an EPS of Rs 7. Going by the present share price Rs 250 the share is ruling at a PE multiple of closer to about 35 times on the current year’s earning and if you take a call on the comparative available peers like Kwality or may be Heritage Foods, that stock is looking quite expensive and let’s go into the background when the issue had faced problem from qualified institutional buyer (QIB) somehow it sailed through on the retail front and on the other category on the HNI front and with the subscription coming in at 1.83 times, some time you have to allow these companies to get settled. I don’t think that you always have a frenzy as I have been repeatedly maintaining on this IPO that you see lot of grey market activity, lot of interested parties plays pushing these stock and all that and after a week to 10 days you see the prices coming to a realistic level. So taking all this into consideration and I don’t think that share is looking attractive because you have a comparative plays available, in fact, may be the Prabhat Dairy which has posted flat numbers yesterday, but even by going by the other companies and all that I don’t think that 35 price-earnings (PE) multiple on the current year’s earning is justified because this kind of frenzies doesn’t last may be one has to wait for the company to come out with numbers and then take a call, but as of now the stock is looking quite expensive. Sonia: There are some comments coming in from Voltas at the conference call where they are saying that the environment is very weak in the Middle East and the project execution remains challenging. What do you do with the stock like this? A: When results were announced by the company two days back at that time I said that I am not impressed with the unitary cooling division because that has given the flat performance on year-on-year (YoY) basis. The project division has indicated some kind of growth and where it was expected that probably the Middle East region will be giving them good growth, but if the management is throwing caution on that also honestly I don’t see any reason and if you really see the run up having taken place in the share price it doesn’t justify moving beyond that. At that point of time also I have said that I don’t think that the share price can go beyond this and I won’t be a buyer, but looking to this commentary where they have given a flat or may be the muted kind of outlook on the domestic as well as on the project division front, there is no reason and I won’t be surprised to see the share taking a further beating from here on because the typical nature of this stock is that this is in fact a high beta kind of stock which if it corrects, it corrects quickly by may be about Rs 30-40 in may be couple of weeks time. I won’t be surprised to see the share again moving back to the level of Rs 300-310. Nigel: Let me get your view on CESC, it came out with a good sets of numbers, we have had quite a rocky last one hour or so, but that stock is still holding with a gain of around a percent. It’s gained closed to around 2.5 percent from the low point of the day, your take on it? A: Posted good numbers because if you see the sequential increase in the operating profit of the company it moved from Rs 200-210 crore to about Rs 380 crore, so that gives a quite a good confidence in spite of the turnover having fallen on a sequential basis from Rs 1,540 crore to Rs 1,480 crore and in fact if you take a call on the EPS also for the quarter I am referring on a standalone, because on a consolidated basis they do have a higher tax liability and the lower minority interest, but on the standalone basis EPS has risen smartly to about Rs 19. If the market would not have been so negative, probably the stock would have been up by about 4-5 percent, so those who wants to take a positional view or may be short term view as an investor can look to buy this stock. Nigel: Indiabulls stocks, the entire group is doing very well. Some of these lesser known names as well were doing fairly well in the last few trading sessions. Now if you take a look at Indiabulls Housing Finance that stock has moved to the low point of the day. What’s your take on that one? A: You are right in fact, if you take the call on the smaller ones also like the Store One Retail and all that they have all shown very good performance. We all know Indiabulls Real Estate has risen by about may be 70 percent, but Indiabulls Housing I don’t think that one can place that stock in the same category, I have a positive view on it in spite of having the strong fundamentals, very good results consistently having shown by the company this seen to be moving in this kind of range where it swiftly goes up and it swiftly correct also. So maybe I am not keeping a negative or cautious view, but this kind of trading volatility will be seen in the stock, so may be one can look to buy when the stock corrects to a level of Rs 680-685.