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Last Updated : Jul 11, 2016 11:25 AM IST | Source: CNBC-TV18

Tulsian upbeat on pharma, logistics cos; negative on telecom

SP Tulsian, sptulsian.com in an interview to CNBC-TV18 while sharing his views why 8K Miles does not warrant a buy at current levels and why he is bullish on the pharma space.

SP Tulsian, sptulsian.com in an interview to CNBC-TV18 while sharing his views why 8K Miles does not warrant a buy at current levels and why he is bullish on the pharma space. He also states his rationale behind being positive on logistics space and negative on telecom.

He also shared his views on real estate space and stocks to look at from an earnings perspective.

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

Anuj: A word on 8K Miles software and if you took a look at the numbers and your call on the stock.

A: Numbers are definitely good, but if you see the kind of volatility, if you plot the chart of the stock maybe for the last six months and the kind of volatility you see, maybe when you talk to few analysts and all that, they also have some kind of what you call linear kind of performance seem to be seen with a growth over next maybe 3-4 quarters. So, taking all this into consideration, I do not think the stock deserves a buy now at the current price and in fact, I will advise profit booking, those who are holding the stock because the kind of volatility which we see in the share price can see it correcting by maybe about Rs 100 or so in the next one month or so.

Sonia: I remember you telling us about maybe less than a week or 10 days ago that the two stocks in the pharmaceutical space that you like a Dr Reddys Laboratories (DRL) and Cadila Healthcare that you would buy on a dip. And today, we have got good news on Cadila. They have received that establishment inspection report (EIR). Can one still buy that stock after the 5 percent run up?

A: If you see the recent developments of these last two days, you can add the name of Alembic Pharma also. Maybe about three months back or four months back or six months back or maybe one year back, there was season of 483 and now I think it is a season of EIR. And I will not be surprised to see this EIRs coming in for many of the pharmaceutical companies. And in fact, that was the theme apart from these two specific stocks which you have stated here which were recommended by me.

In fact, I said that probably the pharmaceutical, because when you have been taking a call on the share price, in fact I have been expecting this EIR for the last maybe one month or so. And I will not be surprised to see that process getting repeated in many of the companies. And the kind of force at which the stocks get rerated, we have seen that happening in case of Lupin. It is seeing some profit booking but that may be a day’s affair and I am keeping a positive view. Same thing for Alembic, same thing for Cadila and I will not be surprised to see that happening in case of Aurobindo Pharma, Glenmark Pharma, Wockhardt and this process will keep on adding, maybe Strides Shasun.

So, I am quite positive and as I have said that 483 seems to be behind us and now it is a time of EIR. So, yes keeping a positive stance. And if one can, in fact, if you see the pharmaceutical experts, some of them have been expressing, there are multiple 483s in case of many companies. But I agree that as a procedure, you need to take each observations separately. You just cannot club all this together. But once the process has started, maybe at a diplomatic level or maybe at the company’s level of having rectified the observations which are not seen of material impact. Maybe things were not seen so serious, there no data integrity kind of things. So, I am quite positive on all these stocks going forward. And as I said, this positive news flows will keep coming in many other stocks as well.

Anuj: This has been your call for some time now that goods and service tax (GST) will pass in this session of parliament and you have been advising buying logistic stocks in all corrections? At current levels is it too late or it does the tactic still remain the same?

A: I don’t think that there is even late buying the logistics stocks but what my advice is that one should start taking a little broader call. One should not really confine only on the logistics stocks but as I said still you can buy the logistics stocks like Gati, Allcargo Logistics, Oricon Enterprise, Snowman Logistics etc., there are number of stocks available in that space but apart from that there are many beneficiaries also.

Even over all on the market because if you really see the GST once that starts looking certain, which I am confident 99 percent that from April 1st it will be seen as a reality April 1st 2017. In fact the revise estimates on gross domestic product (GDP) will start happening because GDP can move up by 1.5 percent, 150 basis point the kind of pessimism or the criticism which now we are all seeing on GDP whether it is a realistic figure, this is just a gross value added (GVA), those things will all be put behind. It is very much necessary to take a broader call on the many of the direct beneficiaries of GST and overall on the market because of the GST likely to get passed in this monsoon session.

Anuj: Any thoughts on telecom space on noise around the Comptroller and Auditor General (CAG) issue and the fact that we have seen big fall in stock prices today 2-4 percent lower for all the four or five major telecom stocks?

A: I don’t keep positive fundamental view. Apart from this CAG news or may be this telecom scan news which has been raised by the Congress, apart from that even if you take I don’t think, or in fact honestly if you ask me I don’t see any positive news seen in the pipe line. With the kind of results which we have seen of quarter four, once you see this spectrum auction which is likely to happen maybe in the next couple of months that will put another pressure on the liquidity of these companies.

The kind of launch once we will be seeing on the Reliance Jio because if you have heard the statement of Sunil Mittal about a week back he has clearly stated that post Reliance Jio there will be huge margin pressure on all these telecom companies. Honestly, I don’t see any reason for taking a positive call. This is just a very small news. Even if the revenue divergence or the non disclosure or not proper disclosure, definitely those things will create a negative impact but that is seen just a minor instances. If you see the broader ones like liquidity crunch further happening on these telecom stocks will really be seen quite severe in times to come.

Anuj: HDIL is one of your favourite stocks. As we speak now, it has moved within two percent of a 52-week high, this and Indiabulls Real Estate of course, the Mumbai based stocks. Do you get a sense that this is not just one of those high beta rallies playing out in real estate? This is for real and can we see much bigger gains from here on for some of these Mumbai plays?

A: You can definitely call both the twins, that is HDIL and Indiabulls Real Estate as a high beta stocks. But I will not call them having gone into the overvalued or the danger territory, but yes, I do not think that there is any point because if you recall about 3-4 days back I have said that I will not be looking to enter into the stocks now and I will not be hesitant to book the profits as well. And at that point if time, I have given 2-3 other new fresh ideas.

So yes, you have to because in the real estate space, you have to, let us not just confine only on the Mumbai property or the Mumbai based real estate companies, there are many other companies also available. So you need to broad base because my view on the real estate stocks are positive and if you recall, the Cineline which was recommended at Rs 21, moved to Rs 70 were also the profit booking was given by me also is a pure realty play though we call it a multiplexes have been leased by them to PVR, but that is also a real estate space.

But what happens that beyond a point, once it starts moving up, people become too possessive and they do not book profits. So, I will not be advising these stocks which have already run up like Indiabulls Real Estate, HDIL or maybe Cineline where we have seen an appreciation of 100 percent to 300 percent after having recommended by me in the last 3-6 months. So, you will need to look for new ideas.

Anuj: The other call was on Zee Media and Himadri Chemicals of course, which had surged on your calls. Any temptations to book profits here? And since we are talking about Zee Media, have you also tracked Zee Learn which is up 8.5 percent.

A: Coming to Himadri Chemicals, Rs 17 to Rs 36 in less than maybe about 30 days. So, I do not understand that how much people really want money. Again, even if the stock moves to Rs 40-45, those who have bought at Rs 17-20. I would advise them that leave for some on the table for the prospective buyer also. You get out, book 100 percent profit.

Coming specifically on Zee Learn, the company has posted good numbers. If you take a year-on-year (Y-o-Y) call, I do not think that quarter-on-quarter (Q-o-Q) call and honestly, if you really ask me, I do not see much of the seasonality element. So, it may not be correct to say that you should look for Q-o-Q, you should look Y-o-Y and not Q-o-Q. But if you see the real news flows lies with the merger of Tree House Education and Accessories where Zee Learn has announced.

Thirdly, coming on Zee Media, I am keeping a very positive bias because if you see the Q4 numbers, the kind of turnaround they have shown in the print business and growth in the media business. This will be on my radar to keep an eye on the Q1 numbers also. If the same kind of turnaround is maintained in the print business for Q1 also by the company, I am not too worried for the television business even if the profits or margins slips by maybe a couple of maybe 5-10 percent, I am not worried. But the turnaround which they have posted in Q4 continues for print business, I will not be surprised to see the share moving up further by about 50 percent for post Q1 numbers. But yes, you need to wait and take a call on Q1 numbers. If you jump now without looking for the Q1 numbers and if it turns out ugly on the print business, then it may remain stagnant. I do not see much correction, but it may remain stagnant.

Sonia: As we head into the earnings season, what are the stocks, 2-3 midcap stocks that you would be looking at where one could expect positive earnings this time?

A: 2-3 things which I have earlier also said. I will not repeat the dye intermediate and sugar stocks. But since you have asked me specific stocks, two or three stocks which comes to my mind, one could be the Bharat Bijlee, the results are scheduled on July 18, they have already declared the results. I am in fact, seeing a big turnaround by all the transformer makers. In fact, that may be followed by the Voltamp Transformer, Transformers and Rectifier, Indo Tech Transformer, all of them are likely to. But immediate or maybe one pick out of that space, it will be Bharat Bijlee.

Second will be Kingfa Science and Technology. If you see, they are making the reinforced polypropylene which is like a metal substitute. You can call it as an auto ancillary. They have recently completed the expansion or setting up of a new Greenfield project with 70,000 tonne per annum capacity. Their present capacity is 35,000 tonnes. So, I will not be surprised to see the company posting earnings per share (EPS) of closer to Rs 10. They have posted an EPS of Rs 6 plus in this fourth quarter and that was a turnaround.

Kingfa Science and Technology which was earlier Hydro S&S. So, that will be the second stock on my radar. And third will be SML Isuzu, because if you see the kind of quarterly performance, they have posted the highest ever sales in the quarter. They have never posted a sales of Rs 5,000 plus vehicles in any quarter in the industry. So, that is going to be a remarkable performance on that front and I will not be surprised to see an EPS of over Rs 24 likely to get posted.

So, there are many and maybe phthalic anhydride. Again this space in which the two companies are operating, IG Petro and Thirumalai Chemicals. There are many ideas. In fact, it will be very interesting to see the Q1 numbers where a lot many ideas are expected to be reviewed or previewed based on expectations of better numbers.
First Published on Jul 11, 2016 11:25 am