Tulsian's view on auto and cement cos, Asian Paints, Adani Ports

So, I am expecting that probably we have a very good upside from here on because now the monthly sales number of June and then thereafter a call on Q1 numbers which as I said are going to be an excellent numbers with EPS expected to be of about Rs 24-25 for Q1.

Sonia: You heard what the Amtek Auto management had to say. Between last quarter and now there has been no progress on the deal closure although they are promising that things will take place within the next four to six weeks. You had recommended the stock a while back. Would you still keep the faith here? A: You are right and actually I recommended the stock and post that the stock has risen by about 50 percent and way above my target given about six months back. But If you really take a call on the management they are just repeating the same thing, debt of Rs 15,000 crore, monetisation of Tekfor, identifying the promoter, identifying the buyer, monetising the other assets also in India and abroad, expected to realise about Rs 7,000 crore. Earlier they were talking about Rs 10,000 but in today's commentary they said about two third of the debt will get reduced in next two to three years. That means they are talking of the debt coming down to Rs 4,000 crore but market has stopped believing the management and unless and until we see some concrete steps because if you recall alone Tekfor can see the debt reducing by about Rs 4,000-5,000 crore for the group because this Rs 14,800 crore debt stated by the management is a consolidated debt and in fact three or four companies all are victim of that.

Whether you include Castex Technology, Metalyst Forging, Amtek Auto or JMT Auto. JMT Auto is not as vulnerable as the other three companies are. So, yes, if these things will happen market will definitely be taking that with both the hands because it is a very good auto ancillary company though again management has posted cautious view on India but these companies, the Amtek Group has a very strong presence abroad. Maybe like you can call it as a mini Motherson Sumi kind of things but the debt burden, the results which we have seen of all these four companies for this March quarter was really horrible, the kind of exceptional and all that. So, yes, quick actions has to be taken and I wish that management stick to their commitment because management stick to their commitment because last time also four to six months back they were very categorical in saying that the debt monetisation will happen in next three to four months but nothing has happened and I recall at that time they had given an indication of Rs 7,000-8,000 crore mobilisation in next one year. We have already seen 6-7 months having elapsed. So, let us hope that this time deal happens in next 6-8 weeks and they are able to mobilise about Rs 4,000-5,000 crore and if that happens there will be a vast rerating of the stock because the company is backed by the asset. It is not like a case of JP Associate Group where the deterioration or asset valuations have fallen. They can recover this money, they have huge investments in India also. So, let us hope the management sticks to their plan of mobilising at least Rs 4,000-5,000 crore in next six to eight weeks for Tekfor. Anuj: The other stock that we have to discuss now is Asian Paints. Of course we discussed it a week back and from that point actually got even more expensive. Do you get a sense that it is time to just retreat from here and wait for correction before making fresh entry? A: That is right and in fact couple of days back only I have said that Rs 1,000 looks the March more valuations and you can call it as fully priced because probably now the momentum or the trading grip that is making the stocks to move up. Once you see the Q1 numbers definitely going to be disappointing I don't think that the same kind of growth can be maintained by the company. Yes, Q2 and Q3 will be a different story but market will not wait for four or five months to see that Q2 numbers. So, the stock has to take some profit booking and may have to correct to a level of Rs 970-975 and I won't be surprised to see that happening in this June series only. I am not saying that this stock will collapse, maybe everyday this stock is forming the higher bottom but the next support maybe seen at Rs 970-975 once that correction even takes place which is expected in this series and on a fundamental basis I won't give a buy call on this stock now. Anuj: A word on Adani Ports. That has been a phenomenal stock. I remember it used to be one of your big calls. You were bullish on Adani Ports. At Rs 202 how is the stock stacked up? A: That is right. In fact maybe when the stock was ruling at around Rs 230-240 and then when it went up to level of Rs 290-300 and during that time the buy call was given and even at the current rate of maybe once the stock corrected to the level of Rs 225 we again started giving a buy call and we continue to have a positive view because if you go by the financial performance and the growth trajectory which the company is posting expanding on both east and west coast those are since quite good but actually it is very unfortunate that in this last four or five months since its inclusion in the Nifty and Sensex this stock has been correcting since then.

Generally it is always the other way. When the stock is included in the main indices it always goes up. Then maybe with Q4 numbers once they are declared some kind of inter-corporate or maybe the group transfer of the money was raised as a concern by the market and that has made the stock to correct. But yes, at the current stage if someone has the courage to buy the stock with one year view I won't be surprised to see with a gain of about Rs 30-35 percent from the current levels. That means a target of about Rs 270-275.

Anuj: Any call on cement? Of course, you have had your favourites in the past but, ACC and Ambuja at current prices. Would you buy them? A: Ambuja, in fact has not participated in the cement rally to the extent which was warranted from that company, number one. Number two, ACC I see a lot of efficiency improvement to be seen in the performance of the company, maybe in terms of the margin expansion and all that. So, both the stocks from that point of view looks good because if you take a frontline stock  like Shree Cements, UltraTech Cement or maybe Ramco Cements, because they are all 25 million plus category cement companies and Ambuja and ACC also, have the same kind of capacity of 30 million tonnes, So if you place them, probably both of them are looking quite cheap as compared to other three stocks which I mentioned. Sonia: The tractor sales for the month of May have looked very good. Mahindra and Mahindra tractor sales up 20 percent, Escorts tractor sales in double digit growth and we have some of these smaller companies like Swaraj Engines which have in any case been in the news on the upside. What would your pick of the pack be? A: You are right and actually we have discussed again that in the morning that M&M is going to perform or going to post very good numbers on the tractor front and rightly so they have posted a sales of 23,000 vehicles, 23,000 plus and actually I expect the same momentum to continue for June also because April, May and June or maybe May and June are always the best. Even coming on Escorts, the tractor number sales of about 5,000 plus, but if you take a call on the Swaraj Engines, they are reaching to their capacity utilisation to the full level. They are supplying closer to about 70,000 engines, if I am not mistaken. They have not been, because you may take a positive view on a quarterly results, but if you take a Y-o-Y result, I do not think that there is any kind of upside we have seen in the performance of Swaraj Engine. The stock has become quite expensive but yes, amongst the auto space, we have discussed a while back that SML Isuzu probably looks the best and then followed by maybe M&M. Even I will remain away from Escorts also because one has to see the valuation and also on those parameters, it is not seem to be too comforting.