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Last Updated : Aug 31, 2016 01:56 PM IST | Source: CNBC-TV18

Will keep Kotak Mahindra Bank & RBL on my radar: SP Tulsian

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com spoke about his reading of the market and his outlook on specific stocks and sectors.

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com spoke about his reading of the market and his outlook on specific stocks and sectors.

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

Sonia: RBL is one initial public offering (IPO) that you have been very positive on. What kind of listing gains do you expect and more importantly, post listing, what would your advice be to retail investors?

A: Difficult to take a call on the listing price but if you recall the Ujjivan Financial Services history, on the first day it was quite muted. Let me just give you a small background, the high networth individual (HNI) category got subscribed 200 times and the grey market was seen quite active. And on the first day, all the grey market rates has to squared off then that may see those rates getting squared off at between 2:00 and 3:30. So, I will not be surprised to see the stock trading in the range of Rs 260-275 or if you want to narrow the range, it could be Rs 265-275.

But going forward, as Anuj Singhal has described just now, or having compared it with YES Bank, if you see the background in which this bank has emerged, Vishwavir Ahuja took over the control in 2011 and see the kind of growth he has posted, he literally brought back this bank which was in the southern part of Maharashtra and northern Karnataka to a pan India level, presence in 16 states and all that. So yes, this bank is holding lot of potential. If you take the two year scenario or maybe the current year, FY17, I will not be surprised to see earnings per share (EPS) of Rs 14. FY18, I will not be surprised to see EPS of Rs 20. If you see cost to income ratio, I do not recall any bank having reduced their cost to income ratio by 10 percent in this last couple of years from FY14 to FY16.

So, everything is rightly in place and I will not be taking a day call. If you all recall Ujjivan and Advanced Enzyme Technologies, both were seen muted on the first day of listing and then we have seen the fireworks having started thereafter. As I said, for the reasons spelt out because of the grey market premium and all that. But still if you want to, maybe Rs 265-275 should be taken as a trading range for the day and those who want to buy it, I advise them to have a view of about one year or so to see good gains being made on this investment.

Anuj: I still remember, you had said screaming buy for Ujjivan at Rs 210. The stock more than doubled to over Rs 500. For RBL, as you said, you said ball-park number for the listing day. But for a 2-3 year investor or say 5-10 year investor, can this be a compounder?

A: 100 percent. It is very easy to take a call for a couple of years. But if you want to identify stock for the next 5-10 years and that too in the banking space, I think that definitely this fits in, in that category. If you recall, the start of 2016 when people were all circumspect on all the banking stocks, I have in fact picked up two banks at that point of time. One was YES Bank and second was Kotak Mahindra Bank.

I maintain my positive view. In fact YES Bank has run up almost doubled post my recommendations in this last maybe 8-10 months. But still I have my positive bias continuing on YES Bank may not advice as a fresh buy but, definitely as a portfolio stock. So, if you ask me to pick two stocks now, I will go with RBL and second is the Kotak Mahindra Bank because the kind of growth, which is envisaged -- and as I said, there is no point in speculating for the next 4-5 years. I do not believe such a long forecast.

But for the current year and for the next year if you have a 40 percent growth seen in your performance, and as a bank, I would say that RBL has set the precedent of a bank acting as a micro financiers. They have proved that with strong presence -- if you see, going forward, right now, they have the wholesale banking ratio or business will come down to 50 percent with 50 percent on the retail, micro and agriculture, which is all giving them very good gains. With the kind of growth which they have projected is likely to continue for the next couple of years. So, yes, definitely, Kotak and RBL, if you ask me to choose from the two banks from the private sector, I will keep these two names now on my radar.

Anuj: The consensus buy now is on cement. I remember, at the start of the year, this was your big call. But, post the rally being played out, would you still be bullish on cement? Any names that you like in this space?

A: For the last 15 days or so or maybe last one month I have been saying that give a pause to about a couple of months to the cement stocks because of the good monsoon, we will be seeing the lower offtake of the cement happening. But that has not really played out very well. But yes, many of the Andhra based cement stocks have corrected and my strategy of waiting for a dip has worked out. The stocks, which you see mainly the Andhra Karnataka based like NCL industries, Kriti Industries, maybe Kesoram or Deccan Cements, they have all been corrected by about 15-20 percent. If you take a call on the other stocks, yes, they continue to remain quite good or have behaved very well on the stock exchanges and with half monsoon now, over or maybe almost three-fourth monsoon is over, again the 6-8 months are seen very good days for the cement stocks or you can say till June 30 of next year, you will be seeing the very good performance.

So taking that into consideration, yes I have positive view on the cement sector going forward. However, I will look for the ideas which are available at an enterprise value (EV) of close to about maybe USD 35 to about USD 60. You have many such stocks available. At least you have about 8-10 stocks available in that space. So, like Kesoram Industries, Saurashtra Cement, NCL Industries or even Kakatiya Cement -- Deccan Cement has been very good because I have been keeping my positive bias on the southern based, maybe Andhra Pradesh, Telangana, Karnataka, these kind of states where these 4-5 companies are operating. Rhey are looking very good.

Another bigger stock or bigger cement player could be Century Textiles, where you have all the divisions are doing quite well; paper, textiles, cement, real estate. So, I am keeping a select view on the cement stocks having EV of less than USD 60 because that can give a good earnings growth and capital appreciation in the time to come.

Sonia: I wanted to ask you about Delta Corp. There is more positive news flow coming in for Delta Corp where they have acquired the market leader in the online poker space. Is this a stock that is still worth a buy or do you think that most of the good news is already in?

A: Most of the news is already priced in into the share because if you see the kind of run up which you have seen in this last maybe couple of months, this stock almost doubled and with the market cap of closer to about Rs 3,600-4,000 crore definitely this online poker, adda52.com is definitely a good acquisition by the company. But I am a bit unable to connect the exact cost of consideration because the kind of conversion, which we will be seeing for the optionally convertible preference shares (OCPS), that gives maybe one convertible preference share will be entitled to about 130 shares. So, I have not been able to honestly arrive at the exact EV of the deal on a 100 percent basis because the information, which have been released by the company to the site are not very clear.

Apart from that, even if you take a call that yes, look into the income of that portal of about Rs 40-45 crore on an annualised basis, I do not think that much increase in the revenue will be seen immediately and so considering that, the price of the present price of the stock seems fully priced.

Anuj: Jain Irrigation has done well. Is it still a good buy at current price?

A: If you see the Q1 numbers, I do not think that the 18 percent rise which you have seen post the numbers having announced by the company warrants more upside. What Anil Jain has said just now that if you do not have the dams and canals or the contract of dams and canals getting scraped, then the water will not reach the farmers on their farmland, which will lead for them or which will encourage them to go for drip irrigation or maybe installation of pipes and all that.

Ultimately, the larger source of the dams and canals have got cancelled. In fact, we hear a lot of speculative things in the market, the kind of corruption which we have been seeing and if all these orders have been cancelled pursuant to the inquiry which have been going on, these are serious issues and it is very difficult to take a call that which company will get caught because you will not be able to have the names on a clean slate as of now.

So, I do not think that even Jain Irrigation warrants a buy after 16-18 percent rise, which we have seen in the stock price after Q1 numbers which were seen better but not very good which warrants such a kind of increase. So, market wanting a profit making trigger, which will be seen in the stock in the near-term.

First Published on Aug 31, 2016 10:28 am