SP Tulsian of sptulsian.com, in an interview to CNBC-TV18 shares his views on refrigerants companies, transformer makers and media reports on mergers in the PSU oil space.
SP Tulsian of sptulsian.com, in an interview to CNBC-TV18 shares why he expects companies in the refrigerants business like Navin Flourine, SRF and Gujarat Fluoro to do well.
He also shares why he has been upbeat about transformer companies, while discussing results of Transformers & Rectifiers and his take on media reports suggesting the government plans to merge 13 PSU oil firms.
Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Anuj: First a word on Navin Fluorine you could look at the primary numbers or if you have a call on the stock at current level?
A: Primary numbers are looking very good and this is what has been expected from the company, because if you really see the refrigerant gas there are three players in this space; one is Navin Fluorine, second is SRF and third is the Gujarat Fluorochemicals, but in case of Gujarat Fluoro you see lot of income coming in from the wind energy business and that is why the market is not giving that kind of valuations, but even and actually in this summer because of the excellent sales of the air-conditioners, we also see the better off take of the refrigerant gas also and that is in fact giving a very good results always Navin Fluorine Q1 numbers are always seen good, Q4 and Q1 numbers so on the similar line one can keep an eye on the SRF also, but yes coming on Navin Fluorine very good numbers seen from the company.
Sonia: Wanted your thought on Transformers and Rectifiers, you had been tracking it for while, what did you make of the earnings at Rs 350 how does the risk reward look?
A: Very good numbers and what I am impressed with the numbers is the top line increase, because if you see closer to about Rs 160 crore top line, I am comparing on year on year (YoY) basis because there is no point in comparing with Q4 where you see the maximum order execution and apart from that the operating profit which was negative at Rs 12 crore in the same quarter last year, we have seen positive of Rs 9 crore and this is what I have been maintaining in case of the transformer makers that the turnaround has really happened in a big way.
On last Monday we have seen disappointment from Bharat Bijlee where we have not seen the top line growth, so I am not able to reconcile that what was the reason, but yes going back to the theme of transformer makers, this Transformers and Rectifiers numbers are really looking very good and one has to keep an eye on the other similar companies like maybe Indo Tech Transformers or maybe Alstom T&D or maybe Voltamp Transformers they all are looking very good and probably they may post the similar kind of results what we have seen from Transformers and Rectifiers.
Sonia: There are various permutations and combinations being spoken about right now and the talks we understand have begun between the government officials of a merger of some sort. What would your view be on this and how should shareholders approach the situation.
A: I could say that this is just a wishful thinking, if I just need to take broadly take the exploration company ONGC and Oil India, Oil India is exactly 10 percent of ONGC so what will you do either you create two parallel companies with the point to point that means ONGC may have the merger of HPCL and BPCL with them, so you will be having a market cap of closer to Rs 4 lakh crore or may be in terms of the matching capacity then what will remain with Oil India will they acquire IOC, now I honestly don’t see any reason happening on that account. Because in the past if you see IBP merged with IOC that was fine and that is why you have seen marketing outlet of IOC being combined of HP-BP plus 20-30 percent extra.
Now come on the exploration and the refining both are independent business. It is just wrong to say that exploration should fall and refining should fall on exploration. Take the case of Reliance Industries they have legitimately prove that refinery can be an independent and profit making business and what we have in HPCL and BPCL and IOC. IOC 50 million tonne, HPCL 15 million tonne, BPCL 20 million tonne so I understand that can there be merger of all the refining companies, can there be merger of part of the exploration company with the refining companies.
I don’t think that all these things will really work and then coming on the Anuj’s point come on the subsidy part, now instead of asking for the ONGC the upstream company to share the subsidy burden when the crude prices move to a level of USD 80, 90, 100 or maybe USD 120 government should come out with a very clear guideline that they will not fallback for any kind of this subsidy sharing at the end of each quarter on the upstream companies. Instead, what government should do that on a real time basis keep increasing the cess on the crude so what optically will be looking to the shareholders of the company that nothing has been shared by ONGC and definitely in that situation even if ONGC has shared some part of income as the under recovery of the oil marketing companies or maybe to supply crude to the refining companies then also it will be seen positive for the ONGC and in turn what will happen if ONGC is making good profit government is ultimately the beneficiary, they will get 30 percent as income tax or maybe 33 percent as income tax, then they will be getting dividend and they will be getting dividend distribution tax.
Now come on the refining companies alone, now we are talking of the petrol and diesel having deregulated. Now we are expecting that no administered price in any situation will comeback. So suppose if god forbids crude goes to USD 100 will this oil marketing companies will be able to pass on the entire increase to the consumers, I really doubt very much at that point of time any government who will be there at the centre will not have courage to say that we are not bringing in the administered pricing mechanism back, so these are all just a wishful thinking the notes can all get prepared, but honestly I don’t see any reason or any logic in merging the exploration and refining both and there are no permutation and combination which are being worked out or which are being seen between the companies which are listed on the stock exchange that is ONGC and OIL India on exploration. Marketing is IOC, BP, HP and pure refinery are Chennai Petro or maybe MRPL kind of things. So I don’t see honestly any logic in this move and this can never get implemented and if it is done it will again be seeing a big mess getting created.
Sonia: Indiabulls Housing Finance what did you make of the numbers. It look pretty good 30 percent growth in their total income, profits have grown as well. From here on what’s your call on the stock?
A: I won’t call that numbers as very great because firstly I don’t take YoY call on the NBFCs because you are on a continuous upward trajectory, so your disbursements, your interest income, your borrowings will all keep on increasing, so if you see on a QoQ basis you will find that the results are flat but no complain, because generally in Q4 again you have the residual figure or the balancing figure for the whole year minus three quarters, but yes the numbers have been good, but actually the two events one is the recent income tax raid nothing has been spelt out that what kind of disclosure or what kind of things have come out from the company number one.
Number two we are seeing the stock moving in a range of about maybe Rs 680-750 the range keeps moving up or down by maybe about Rs 10 or so, because the share is now ruling at upper end, I won’t be taking a positive call on the stock to go long. Those who are holding profit can go for profit booking and they will going to see the share coming back maybe correcting by about Rs 30 or maybe Rs 40 and that will be the right price to enter in.
Anuj: Looked at the stock Hitachi Home?
A: I have seen the results, but this kind of results were expected from all the consumer durable companies, but what will be the problem if you see Hitachi Home in the last Q2 that is September quarter they posted a loss, in Q3 again the flat kind of performance with the income will be falling substantially because if you really see this June quarter because of the scorching heat and because of the homes getting shifted or new homes getting set up prior to school opening. You always have this kind of performance coming in, so I won’t be too excited to buy the Hitachi Home now after run up of 10 percent. I agree that on YoY basis the growth of about 33 percent has been shown on the bottom line, but because of the operating leverages that kind of growth in the bottom line was expected because there has been an increase of about 18-20 percent on the top line as well, but Q2 and Q3 will be again very lull and dull, so that will keep you drag into the stock maybe for six months or so and even March quarter can only will start showing some kind of uptick so I won’t be taking a call on the stock merely based on this, because these are just the historic, future pipeline for the next two quarters are seen flat.
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