Tulsian tells: Why Bombay Dyeing is no more a textile stock

In an interview with CNBC-TV18, market expert SP Tulsian gave his stock picks for the day and shared his market outlook. Below is the verbatim transcript of SP Tulsian's interview to Sonia Shenoy & Anuj Singhal on CNBC-TV18. Anuj: Do you track Jyoti Structures it used to be big stock of course long back but your thoughts on what KEC International just told us? A: Recently, I am not tracking this stock so difficult for me to comment on. Anuj: What about KEC International if you have tracked that stock as well? A: KEC has posted good numbers, in fact if you see the margin improvements and all sort of things and the commentary on bagging the new orders and all that I am keeping a positive stance on this. However, it is difficult to take a call that what will be the impact if they succeed in acquiring Jyoti Structures. However, if I take a view on quarter two numbers their numbers are really quiet good. Sonia: The other stock I wanted to discuss with you is BHEL. How did you read into the numbers and what would your call be on the stock? A: Numbers are looking quite good, in fact if you take a call on the power sector the EBIT increase in the power segment has been really phenomenal. If you see the turnover has come at Rs 5,250 crore against Rs 4,300 crore sequentially. However, if you see the EBIT from power segment it has risen to Rs 505 crore from Rs 310 crore. On the other hand industry segment has disappointed but I am not too much worried on that where the EBIT has slipped by about may be 90 percent because that is the small segment. However, having worked well on the power segments I think the company is back on its track. May be there is concern on EBITDA basis they have turned positive, but on operating profits still you have a loss in the quarter two as well. That loss is seen trimming, but I am impressed with the power segment division having performed quite well as I said that EBIT is seen at Rs 500 plus against Rs 310 crore on a sequential basis. Anuj: You have been long tracking this stocks Bombay Dyeing, down 4 percent now any temptation to buy or would you give it a pass? A: You are right in saying that this is no more a textile stock, but I would say that now this is only a real estate stock. This is not a textile stock at all. However, I am unable to understand if you take a call on the results whether quarterly or the yearly results for last three and four years a typical behaviour or the typical pattern we see that losses of textile is getting set off against a real estate division. If you see the kind of hopes the people had that they have about 90 acres of land at Naigaon and Worli both will yield very good results and very good numbers. Even I was very positive on the stock may be three or four years back, but looking to these kind of performance you have not seen any kind of breakthrough. The kind of development which they have carried out with the dissatisfied buyers in their Naigaon project or near Dadar project I don’t think that even real estate because now this is purely a real estate company it will be wrong to call it as may be the textile intermediate or may be a textile company. All those things purely the real estate play may be if you include the showrooms of the textile division also everything now is a textile company. However, on that front also they are performing really very badly. So, I will be remaining away from the stock even from a real estate point of view. Anuj: Diageo would bought the stake at much higher price. It is now down to 2,000 your thoughts on the stock? A: If you take a call on this stock many of the High net worth individual (HNI’s) have really gone quite positive on the stock. If you see the financial performance of the company in this last may be about 18 months six quarters you have not seen any significant progress having made. People having talking of this synergy between the Diageo products and the United Spirits independent products because both company being the largest and the second largest in the world I am not referring in India. So, naturally that synergy firstly has not been seen. Secondly, on a standalone basis on the product of United Spirits alone are not much of the growth has been seen. Maybe thanks to the liquor ban which we have been seeing now happening in many of the state like Kerala, Bihar and all that, so people seem to have been getting tired. We all know that many of the prominent HNI’s have taken a stake in the company that a much higher price Rs 2,700-2,800 to as high as Rs 3,000. Some of them have exited in the open offer also and if you see the valuation getting eroded in your investments in your last 18 months obviously at some point of time you get tired and exit from the stock . In the next 12 months or so I am not keeping any positive stance from here. You may not see going it further down but you may not see much appreciation also happening except for many be about 15-18 percent upside you can expect in next one year on the stock. Sonia: How do you approach the tyre space now because despite lacklustre numbers these stocks are spiking up? Forward looking do you see any kind of improved prospects for the tyre space? A: If you take a call on all tyre stocks individually may be the momentum is now seen more in the Ceat. May be some times we see MRF moving up, but even from a traders point of view or from investor point of view MRF is seen very risky because of the high price. Ceat seems to be safe and better stocks amongst all the tyre stocks from a trading or may be from a short-term or near-term investment point of view. If you take a call on other stocks may be like Apollo Tyre and JK Tyre & Industries both are seen to be ruling quite expensive. I am not talking of the smaller one like may be TVS Srichakra or may be Balkrishna Industries kind of things. So, I am keeping my neutral stance on all the tyre stocks. I am only waiting to see now the results of the Kesoram Industries which I have been repeatedly seeing because they have shown the EBIT at virtually no profit no loss at the EBIT level which used to be at Rs 400 crore in the FY16. I am keeping a watch on the results of Kesoram Industries. On quarter two if they show some kind of significant improvement then definitely the positive call can be taken on that stock but otherwise from pure tyre space I won’t be taking a renewed buy call on any of the stocks.