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Last Updated : Aug 05, 2016 09:06 PM IST | Source:

Valuations of multiplexes not convincing: SP Tulsian

Only 8-10 movies of the 150-160 are raking the moolah at the box office, says SP Tulsian of

Only 8-10 movies of the 150-160 are raking the moolah at the box office, said SP Tulsian of Multiplexes were running at 75-80 percent acapacity during the release of Kabali. 

"The kind of overheads you have in the form of electricity, in form of rental, in form of the personnel cost, they seem to be very high," he told CNBC-TV18.

An exception can be made for INOX group as it is a different ball-game, he said.
"In fact, the idea of INOX Group starting multiplexes was that they wanted park their surplus money and they thought of buying the multiplexes, owning them and then running the show,"  he added. 

Below is the verbatim transcript of SP Tulsian's interview to Latha Venkatesh & Anuj Singhal on CNBC-TV18. 

Anuj: The stock of the day is a stock that you have liked, Bharat Forge. Weak numbers but the management commentary has been quite good. 12 percent higher now so rewarding patient investors but from now on do you think this is still a stock that can be backed?

A: I won’t attribute only the management commentary for this upsurge because you just can’t, I have been saying that in fact when we had a show of Bull and Bear where I have taken a bull view, you just can’t write off these kind of stock merely on Q1 numbers. See the kind of beating which we have seen ahead of the numbers. We just simply neither can attribute this reason for short covering nor we can attribute the reason of the good management commentary. 


Management commentary was not so robust where they have given a very robust picture of the coming quarters of Q2, Q3 and so on. So, my point is that, yes, the value buying is seen coming in on these kind of stocks. They have in fact, if you recall about a week back or 10 days back, the reduction of stake in the defence company, that was also unwarranted. However, there are forces, the bull and bear which operates in a particular stock. So I don’t think that those things have really worked now and maybe the value buying or renewed buying interest coming in from the value investors is the outcome of such a big upsurge of close to 10-12 percent. 

In fact prior to results also, I have been saying that the stock has taken unreasonable beating and I don’t think that these kind of valuations are warranted. So, those who have a high risk can always look to enter into the stock and exactly that is what is happening now in the stock and I am keeping my positive bias, positive stance on the stock. 

Latha: The other stock that has done very well today is Apollo Tyres. We had the management on the channel, our colleague was speaking to him in Delhi, it was an expectation that anti-dumping duties will be laid on imported Chinese tyres as well as a very strong commitment on margins. What do you see in that stock? 

A: If I purely go by the commentary or whatever the comments which we have seen from the Apollo Tyres management, the management has not confirmed the 18 percent margin. However, they have said that margins are looking better going ahead but I am playing more on the theme of any of kind of anti-dumping duty being levied on this and the kind of noises which we have been seeing from the tyre industry and no relief has been given. 

In fact government has been prompt in giving that kind of relief to the steel industry but actually if you see I don’t think that the passenger vehicle tyres are seeing so much import from China but truck tyres are seeing imports in a big volume. Apollo Tyres is a significant player in that space so maybe on hopes of some relief in the form of the duty protection to be seen from the government we are seeing this kind of upsurge actually happening in all tyre stocks. 

If you want me to have the pecking order, probably Ceat looks the best because they have an ideal combination of passenger vehicles, truck tyres and all sort of things. So, maybe Apollo Tyres, I won’t be now taking a long call on the stock at the current prices but maybe Ceat looks better. However, otherwise overall, I think caution is required because if you take a call on all type of tyre makers, the stocks have all been seeing going up whether you talk of MRF, JK Tyre & Industries, in fact JK seems to be quite weak amongst the lot but still even that stock has seen a significant rise. 

So, overall this euphoria is building up on tyre stocks but maybe with some room for upside from trading perspective going forward Ceat can be taken a call even at the current level. 

Anuj: What are your thoughts on this exhibition theme? In the past you have liked stocks like Cineline which of course is a much smaller peer but PVR, INOX, couple of other stocks, how would you approach them now? 

A: I am not convinced with the valuations of PVR. In fact I have been maintaining my view for long and actually maybe post that the stock has risen by about 15-20 percent. Cineline is totally a different story. That is more a realty play, they are owning nine multiplexes which have been leased out to the PVR. 

If you see the situation going forward, we have been talking of the movie releases and all that, but if we go by the history of the Bollywood every year 150-160 movies are getting released. I have not seen any numbers getting increased in that but out of that only 8-10 are giving a box office business. Now nobody is talking of Kabali, the kind of euphoria which we have seen building up and let me tell you even on the first day of Kabali release, multiplexes where all empty, empty means not full. They were running maybe 75-80 percent occupancy. 

So, the kind of overheads you have in the form of electricity, in form of rental, in form of the personnel cost, they are all seen to be very high. I agree with Parag’s view that INOX Leisure is totally a different ballgame because they are owning many of the properties. In fact the idea of INOX Group starting this multiplexes was that they wanted park their surplus money and they thought of buying the multiplexes, owning them and then running the show. 

In case of PVR, they are leased premises so I am not convinced with these kind of things. Now see the competition coming in, let me just give you an example of a club here in Mumbai, NSCI. They exhibit all the latest movie released to their members, six-eight shows. The tickets which they are offering at about maybe Rs 200-300 per member and in fact all the members are enjoying that kind of things along with the mineral water, along with popcorn, snacks and all sort of things. So, what my point is with the digital and same thing is happening in the multiplex in the large residential complexes also. 

So, what might point is that if you want to take a fundamental view, I don’t think you will get convinced but if you want to co-relate with the stock price movement and if I want to justify the share price, the share price rise, I will always say that three movies are releasing on 12th Mohenjo Daro and all sort of things, I am not convinced with these kind rich valuations on any of these multiplexes. 

Latha: You wanted to comment on this? This is as good as some of the other sugar stocks. 

A: I have not gone through the numbers, but I do not think that I will be too excited, because if you really go by the pointer, I agree that EID Parry have the sugar mills in Karnataka, Andhra and Tamil Nadu. So, Karnataka Mills are definitely, holding a good amount of inventory. And EID Parry is a holding company for Coromandel International and these numbers are reflecting that also. So, unless and until you analyse the numbers I will not be able to comment on the result. 

Anuj: You track Tata Chemicals? 

A: Yes, I do track it and in fact, I am impressed with the numbers because if you really see the soda ash prices in which they have a significant presence that has really contributed to a great extent. And in fact, we have been seeing the chloralkali that is caustic soda and soda ash, both the prices have been going up. In fact, chloralkali, caustic soda is a separate business, soda ash is a separate business. But prices of caustic soda and soda ash moves in tandem. And that is why we have seen good numbers from Gujarat Alkali, Chemfab Alkalies but these numbers are really looking very good. And if you take a call on all the segments like maybe soda ash I have covered one and other agri inputs, that segment has also given a very good EBIT of about Rs 100 crore plus. So, I am impressed with the numbers of Rs 8 EPS. And in fact, now, if you take the trend, when I have been talking to few people, a couple of days back, these soda ash prices have been keep hardening. So, again Q2 outlook looks good because one month has also seen good realisation of the product. 

Latha: Varinder just tread out a lot of lesser known midcap and even smallcap stocks. Is there anything that has lately come into your gaze either because of numbers or because of developments? 

A: One stock which has not come to notice is one is SML Isuzu. If you see the EPS, company has posted an EPS for first quarter Rs 28.42 against the whole of FY16 EPS Rs 35. Now if you see the July number also, July first quarter sales number was 28 percent higher and July sales numbers are 30 percent higher. And company is increasing their capacity from 18,000 vehicles to 24,000 vehicles by setting up an additional assembly line with just Rs 30 crore investment which will be operational may be in the next 8-10 months or maybe 10-12 months. So, the Q1 numbers are always seen to be the best for SML Isuzu, but going forward even Q2, if they having seen an EPS of Rs 28, I will not be surprised to see the whole of FY17 showing a growth of 40 percent. That means EPS of plus Rs 50 and remember, last time when looking to these kind of numbers, share has touched a high of Rs 1,600 and now, share is ruling at Rs 1,320-1,330. So, I am quite positive taking a call and looking to the July sales numbers as well. 

Latha: Any final thoughts, stocks that you may want to discuss which we left out? 

A: We have broadly covered the entire thing. One thing which will keep the interest alive next week will be the sugar stocks because Dhampur Sugar and EID Parry, both the results have probably shown the kind of expectations which we were seeing to come in from those companies. So, maybe next week is full of these sugar stocks coming in and actually the management commentary will be playing a very important role. Now, take the case of EID Parry. In fact what is the fresh sugar they have produced maybe in the Tamil Nadu and what kind of quantity being inventory held by those companies having sold by them and going forward, what is the scenario on the pricing front. So, all these things are going to remain in focus for the next week for that particular sector. 

And the second could be the dye and dye intermediates on which I have been keeping a bullish call. Only Bodal Chemicals have come out with a very good numbers. Next week again, three or four companies, which are into that space like Kiri Industries, Bhageria Industries or maybe AksharChem, they are lined up to come out with the numbers. And I am expecting again very good numbers to be seen, in fact better than what we have seen from the Bodal Chemicals. So, these two sectors will continue to remain on my radar for the next whole week.

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First Published on Aug 5, 2016 09:06 pm
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