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Last Updated : Jan 10, 2017 09:36 PM IST | Source: CNBC-TV18

Tulsian's preferred picks in transmission, bank & tyre sectors

In an interview to CNBC-TV18 SP Tulsian of sptulsian.com shared his preferred picks in the oil & gas, transmission & distribution, banking and tyre spaces.

While there is a positive bias on Chennai Petro stock, it is advisable to stay away from it just now as it has run up quite a bit, says SP Tulsian of sptulsian.com in an interview CNBC-TV18. He feels a 6-8 percent correction would be good.

Tulsian is also positive on the transmissions and distribution space and apart from majors like ABB, Siemens and Crompton Greaves, he prefers ancillary companies like Voltamp, Transformers and Rectifiers and Bharat Bijlee. 

He also shared his preferred picks in the private banking and tyre space.

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

Sonia: I wanted to talk about Chennai Petro because I remember this being a stock on your radar and a stock that you had recommended in the recent past. What is your stance on the stock now because the volume and the price action has been picking up quite a bit on Chennai Petro especially in the last fortnight?

A: Keeping a positive bias, but I won’t advice buying because the stock has run up so much. It is better to wait for the Q3 numbers because we have been giving a buy call on the stock since they have been ruling quite low. So, maybe now one should wait; there is no point in entering now because you may see the stock getting corrected also by about 6-8 percentage once the profit booking starts coming in. So, maybe Rs 300-310 is the ideal level where one should look to review again.

Anuj: What are your thoughts on Max Ventures which is up 12 percent right now?

A: Yesterday also I have expressed my view that I am keeping a neutral stance on this. Yes, they have the growth plans and all that but if I go by their financial results, the high equity base and they are yet to perform. I agree that they have lot many verticals, the news, the stock which we have been seeing today is because of the allotment of about Rs 140-145 crore to one PE investor and one management at price of Rs 77-78 and that has probably led to the stock going up so much because probably if you see the education packaging, they are all very sunrise industry kind of things but if you take a earning call, maybe I think I am not very sure the six months performance of the company has shown an EPS of less than Rs 1 or maybe Rs 0.75-0.80.

So, I don’t think that that is really encouraging because when you go on the comparative basis with other comparable peers, those stocks are looking quite good. So, yesterday also I expressed my views that I am keeping a neutral stance. I will not just jump on the news of the PE investor subscribing at a high price or maybe promoters taking the warrants to the extent of Rs 28-29 crore which is not very significant if you really see to the promoter and the size of the company. So, still keeping a neutral stance on the stock.

Anuj: Your thoughts on both ABB and Power grid for that matter?

A: I will take a very positive view on the transmission and distribution (T&D) space and probably I may not take a call on both the stocks. However, if you go and see the ancillary one like the transformer makers like Voltamp Transformers, Transformers and Rectifiers, Bharat Bijlee in fact those stocks are looking very good. Because if you go by purely on the Power Grid I have always been maintaining that a debt of closer to Rs 90,000 crore is seen quite scaring in spite of the growth coming in and sort of things. If you see ABB I am not saying that I am not keeping a positive view because of this order of Rs 4,350 crore.

The kind of investments having lined up by the Power Grid and in the T&D space of over Rs 2,00,000 crore the real margin expansion and the topline accretion is seen more into the ancillary space like Transformers and all that. So, I said that may be this kind of GE T&D, Bharat Bijlee, Voltamp Transformers, Transformers and Rectifiers, in fact we have been keeping hugely positive view and in fact GE T&D which was earlier Alstom T&D can be looked in to. In fact in my view that stock is ruling now at 52 week low. If you have MNC with 75 percent stake held by GE I don’t think that you can really go wrong by making investments in these stocks.

Sonia: We were talking about how many of these companies in the power space are now getting more orders some of the infrastructure companies as well from this list you did speak about a few names like Alstom T&D etc but any of the other names that interest you that one can perhaps invest into the longer term?

A: The names which I have given you were all in the T&D ancillary space which are catering largely to T&D space. However, if you just want to focus purely on the T&D space then two companies comes to my mind because ABB is definitely a leader in that space but two companies which can also get looked into are Siemens and Crompton Greaves.

Because in fact in Crompton Greaves I am waiting for the event also to happen on account of the B2B automation division. This street is saying that the deal is likely to get consummated in this month itself which they earlier have indicated also four-five months back. If that deals happens and practically that will make the company debt free because T&D global operation monetisation have failed and they are looking to sign another term sheet but B2B automation division monetisation is likely to happen in this month for about Rs 800 crore and if that happens Crompton Greaves will become a debt free company.

I am keeping a very positive view on Crompton Greaves because then they will only be left with the domestic operations where they are doing really very well. So, amongst the directions you have asked also direct T&D player ABB, Siemens and Crompton Greaves looks good, but I again reiterate that ancillaries are support stars which they all have been supplying into the T&D space must also get looked into.

Anuj: IndusInd Bank is not among your top picks in the banking names, maybe it is because of valuations that you prefer Kotak Mahindra Bank and Yes Bank, but what are your thoughts on these numbers that are flashing right now?

A: The way we have been seeing the criticism or the fear or the apprehensions because of this demonetisation across the board, I don’t think that you can expect better than these numbers. In fact, I would say that these are the excellent numbers and in fact if you see the third installment of advance tax having paid by all these larger private sector banks whether you include IndusInd Bank or you include ICICI Bank, HDFC Bank, Kotak Bank, in fact all have hinted at that point of time only that the results are seen to be quite good.

We must applaud these excellent numbers where the EPS is seen closer to about Rs 12, consistency with bottomline. I won’t be worried a bit because if you ask me I was expecting that if the bottomline is more than Rs 700 crore, which is Rs 750 crore, I won’t be afraid even if there is a slight treasury gain or maybe some kind of other investment income having booked in this quarter because this is a very usual thing. Let me add here, the Bank Nifty which has risen by 500 points in last three days and let me be very categorical that we have not been able to notice that the rise of 500 points from here in this last three or four days will really keep the momentum on because all these private sector bank whether you take a call on the ICICI Bank or maybe the other banks in the similar space, Yes Bank definitely is in that category including Kotak, RBL Bank , are all going to cheer the market.

Anuj: The tyre space remains a mystery to me, the way some of these stocks are rallying, Apollo TyresCeatMRF, what could be going on here?

A: All of them are having a strong trading grip and actually if you take base of all these stocks, maybe I would say Ceat has a base or support of Rs 1,100-1,150, MRF has a base of maybe about Rs 50,000, JK Tyres maybe having a base of Rs 125 or maybe Apollo Tyres at base of around 190 or so, and actually from those levels again starts moving up. Maybe on a lighter note if I say that probably the players those who have been holding the position are just watching the rubber prices at where it has all been moving up and the stock starts taking a swing accordingly.

However, I don’t see any weakness, but I don’t see any investment as well in these stocks at the current levels and I am referring the word at the current level. If it dips say by about 5 percent or maybe 5-6 percent or so on the news of rubber prices hiking up, plunge at that point of time; you are not going to lose the money.

Sonia: Next week will be important because we will kick start the week with Reliance Industries numbers on Monday. The stock has actually gained a lot of momentum since the last quarter. Are you still bullish this time around and what is the expectation, just prima facie expectations from earnings?

A: For Reliance quarter two was very good for the company on the refinery front as well as petrol chemical front. I don’t see any other segments because you can’t bank on the retail or maybe exploration or maybe telecom because nothing will go into contribute either to the bottomline or to the topline. Keeping a neutral stance because unless until you have the clarity in respect to petchem additional capacity having gone on stream which will get largely seen reflected into the quarter four numbers.

I am keeping a neutral stance, because I am not expecting much surprises over quarter numbers, it could be, though we have not worked out the exact numbers but it will be more or less flat or maybe mildly lower than what we have seen for the quarter two numbers.

(Disclosure: Reliance Industries owns Network18 Media and moneycontrol.com)
First Published on Jan 10, 2017 09:30 pm