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Last Updated : Feb 22, 2017 06:26 PM IST | Source: CNBC-TV18

Tulsian tells: Why he is bullish on south based cement stocks

In an interview with CNBC-TV18, market expert SP Tulsian listed his stock picks for the day and shared his outlook on various sectors.

In an interview with CNBC-TV18, market expert SP Tulsian listed his stock picks for the day and shared his outlook on various sectors.

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

Anuj: Money is chasing Reliance today, no doubt about that. You could have their delivery numbers of Rs 2,000 crore or upwards of that. Your thoughts on whether this could be the next market leader?

A: Two things. Firstly, it is certain that the foreign institutional investors (FII) were seen very big buyers in Reliance Industries for the simple reason if you see, in fact yesterday, we have discussed Reliance Industries, in fact yesterday, after the press conference or after the announcements by Mukesh Ambani, the stock should have shown a big uptick. And all other telecom stocks should have corrected. But we have seen the other telecom stocks mildly correcting, but Reliance have not taken a big upsurge yesterday.

So, what happens generally whenever the FIIs come into buying because of the global time difference and all that, they take a call on the stock and we have seen the stock moving up from opening, from the first tick which was at one point, it was up to 4 percent and then moved to a level of 12-13 percent higher. So, definitely this FII buyings are seen having taken place today. This may continue till tomorrow then there will be definitely a pause.

Now then there after beyond Rs 1,200 people will start taking a valuation call. Still if you take a Jio financial performance, the topline which is being talked of, I have read the flashes also on the channel, on the screen. That people are looking for a topline of closer to about Rs 1 lakh crore also in FY18 which in fact I think it looks absurd. It can be anywhere between Rs 30,000 crore and Rs 45,000 crore because it all depends on the client additions which likely to continue going forward from here on as well and as I said in the morning that may be 150 million subscriber could be seen in FY18 in the next six months or so.

So, maybe people will start taking a valuation call, will apportion the total because right now the market cap of Rs 4 lakh crore and enterprise value of about Rs 5 lakh crore for the stock will get segregated between telecom, refinery, petchem and other businesses. So, maybe after a further increase of about Rs 50-70 the stock should take a pause.

And as you have said that can this be a market leader, I do not think that beyond a point, this can really drive the market from here on because collectively the things have to be taken by other stocks as well. But yes, this will not be seeing any kind of drag contributing to the Nifty or to the indices going forward.

Sonia: Today of course, the midcap index is under pressure but by and large, there have been plenty of new spaces that have opened up for participation for long-term retail investors. Anything that has caught your eye recently where one can put in some fresh money considering the momentum in the market?

A: We have renewed the buying call on the south based cement stocks and mainly the smaller ones, those who have the capacity of half million tonne to 2.5 million tonne or maybe three million tonne because if you see, in the southern pockets, the cement prices have risen by Rs 15-20 per bag in this recent maybe last couple of weeks. And the off-take is seen to be quite good. So, the companies having presence there will be enjoying the operating leverages, plus the better utilisation.

So, both will be seen quite positive and we all know that till end of June you do not have any kind of headwinds seen coming in for the cement sector. So, Q4 and Q1 will really be seen quite good for those companies. There are about 6-8 companies operating in that region. So, we are in fact keeping a positive stance on the southern based cement stocks.

Anuj: Do you get a sense that at Rs 110, most of the good news is now priced in, in the Idea Cellular stock?

A: In fact, if I take a call and look into the situation prevailing in the telecom sector going ahead, in fact, I find this value to be quite stretched because if you see the debt positions coming in, in Bharti Airtel, even if Idea and Vodafone emerges as the largest players, see the financials of Idea Cellular which are going to get pooled into Vodafone. They have already turned a loss-making company with Rs 40 crore debt. We do not have much access to the financials of Vodafone for making an analysis and all that.

Maybe we can just take a bird's eye view. So, with a debt of Rs 1 lakh crore in the combined entity against Rs 90,000 crore of Bharti Airtel and that too with their overseas operations included in that. In fact, I am quite circumspect. I do not think that even if with the – in fact they will be forced to sell some part stake of maybe 10-15 percent as Nisha has said, to deleverage the balance sheet. But I do not think that that will really serve the purpose unless and until you have your operations seen to be viable which at least we have seen that to be in case of Bharti Airtel for the Indian operations. So, I am keeping my cautious view and maybe Rs 110 at which Idea is ruling now, I see it aggressively or maybe highly valued now at Rs 110.

Anuj: I wanted your take on the story that we broke about Tata Motors.

A: If you take a longer story on the Tata Motors, Jaguar Land Rover (JLR) doing exceedingly well. Indian operations, commercial vehicles, I do not think that there has been any problem. The whole problem was started with the passenger vehicle. In fact the foray of the management maybe about a decade back into the passenger vehicle and we have been seeing a continuous decline since then.

So, if they could be able to tide over and I think that this seems to be the aggressive plans of the new Chairman which has come as the Tata Sons probably working because his maximum focus will be now seen coming on the Tata Motors if you remove Tata Consultancy Services (TCS) because he has already been having the full grip of TCS.

So, the next company on the top priority of the new Chairman of Tata Sons will be on Tata Motors. And if that happens, that will vastly get rerated. The stock will vastly get rerated because all the analysts are, consensus and unanimous that the passenger vehicle or the standalone Indian operations are only troublesome in which even the commercial vehicle profitable operations are getting diluted or getting drained into. So, I am keeping a very positive move if it happens.
First Published on Feb 22, 2017 06:24 pm
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