SP Tulsian, sptulsian.com in an interview to CNBC-TV18 gave reading and outlook for stocks across various sectors like Coal India , Sesa Goa , Orchid Chemicals , Hexaware and others.
From the IT space, one could bet on stocks like Mphasis , Rolta and Polaris , he added.
Below is the edited transcript of Tulsian’s interview with CNBC-TV18. Also watch the accompanying videos.
Q: What did you take away from what Coal India’s management told us?
A: The new price mechanism will help the company because of gross calorific value, basic formula on which it is recognised world over. The company is deliberating to price based on that and it will help. But, the only thing is that FY12 production targets may take a little hit here or there. The wage revision is also going to happen and I don't think that will be such a big dampener.
Overall, it seems that positive view can be taken on this stock because the government will be very serious in seeing the production by Coal India increases. Considering the power situation now, you can’t substitute feed stock with gas, which is continuously on a declining trend.
All power sector projects have been excluded for that supply largely to divert it to fertilizer or other priority areas. So, coal will be the focus of the government to ramp up production which will directly help Coal India. Any pricing based on gross calorific value will definitely be in favour of the company.
Q: Some serious damage is going on in some of the metal names. Sesa Goa has collapsed to Rs 156. Hindalco is down to Rs 112. The year hasn’t begun well for this set which has already fallen such a lot in 2011?
A: Sesa Goa is a victim of export duty increase which has been made from retrospective from December 30 to 30%. That can directly be attributed as a reason for the fall in Sesa Goa. I am unable to understand for Hindalco. I don’t think that it can just be a short-term, because we have not seen the matching fall in the price of Hindustan Zinc or Sterlite Industries. Sterlite Industries is seen to be bottoming out.
In fact non-ferrous metal stocks like JSW Steel have been holding on. But I have been maintaining my view for last 15-20 days, I am seeing not much fall in the share price of non-ferrous metal from hereon. Sesa Goa is a victim of the increase in the export duty. Obviously, the global prices of the iron ore are falling, so that will definitely be putting a pressure on the realizations of the margin of Sesa Goa.
From hereon even China maybe consuming less of the iron ore, which means lower off take with the lower realisation. So any increase in export duty it has to be matched with the reduction in the realizations by the company. Sesa Goa can settle at about Rs 150. I have been taking a fundamental call last week that it looks to have bottomed out.
Considering its market cap of Rs 14,000 crore backed by 20% investments in Cairn India valued at Rs 12,000 crore, the core business is cheaply available even by including Rs 4,000 crore debt. Sesa Goa is one of a case, but overall I don’t think that I have my negative view on the non-ferrous metal stocks. Hindalco is just one of a case probably that maybe to do with the trading shorts or whatever we are seeing in the stock happening today.
Q: Orchid Chemicals has spiked up on some new drug development news. Have you tracked that?
A: I have only heard this news and this is going to be quite positive. I think it is from Europe region. Apart from that even forex losses should be helping the company, maybe new guidelines on booking of forex losses. It could be a combination of both these factors because stock has been seeing short sold positions existing in the system. Both these news put together may have had this positive effect on the stock price.
Q: The management of Hexaware indicated that they have seen lot of strength and from hereon as well things look quite strong. Ahead of the IT earnings season, is there anything in the midcap IT bunch that you would want to play for either with a shorter term or a medium term time horizon?
A: I don’t know whether I will be taking a positive call on Hexaware. When the company came out with September quarter results, a lot of trading interest or buying interest was seen and it went up to Rs 85-89. Since then it has been moving in a range. As far as two or three stocks where one can take a punt are concerned, one is Mphasis it looks good at Rs 300.
Second could be Rolta, it has taken a beating because of FCCB liability or debt concerns, that made it to correct a lot. Third could be Polaris because it has started showing some interest for last 15 days. I will keep on radar on these three rather than Hexaware because Hexaware has not been showing any trading movement for the last couple of months or so.
From the IT space, one could bet on stocks like Mphasis , Rolta and Polaris , he added.
Below is the edited transcript of Tulsian’s interview with CNBC-TV18. Also watch the accompanying videos.
Q: What did you take away from what Coal India’s management told us?
A: The new price mechanism will help the company because of gross calorific value, basic formula on which it is recognised world over. The company is deliberating to price based on that and it will help. But, the only thing is that FY12 production targets may take a little hit here or there. The wage revision is also going to happen and I don't think that will be such a big dampener.
Overall, it seems that positive view can be taken on this stock because the government will be very serious in seeing the production by Coal India increases. Considering the power situation now, you can’t substitute feed stock with gas, which is continuously on a declining trend.
All power sector projects have been excluded for that supply largely to divert it to fertilizer or other priority areas. So, coal will be the focus of the government to ramp up production which will directly help Coal India. Any pricing based on gross calorific value will definitely be in favour of the company.
Q: Some serious damage is going on in some of the metal names. Sesa Goa has collapsed to Rs 156. Hindalco is down to Rs 112. The year hasn’t begun well for this set which has already fallen such a lot in 2011?
A: Sesa Goa is a victim of export duty increase which has been made from retrospective from December 30 to 30%. That can directly be attributed as a reason for the fall in Sesa Goa. I am unable to understand for Hindalco. I don’t think that it can just be a short-term, because we have not seen the matching fall in the price of Hindustan Zinc or Sterlite Industries. Sterlite Industries is seen to be bottoming out.
In fact non-ferrous metal stocks like JSW Steel have been holding on. But I have been maintaining my view for last 15-20 days, I am seeing not much fall in the share price of non-ferrous metal from hereon. Sesa Goa is a victim of the increase in the export duty. Obviously, the global prices of the iron ore are falling, so that will definitely be putting a pressure on the realizations of the margin of Sesa Goa.
From hereon even China maybe consuming less of the iron ore, which means lower off take with the lower realisation. So any increase in export duty it has to be matched with the reduction in the realizations by the company. Sesa Goa can settle at about Rs 150. I have been taking a fundamental call last week that it looks to have bottomed out.
Considering its market cap of Rs 14,000 crore backed by 20% investments in Cairn India valued at Rs 12,000 crore, the core business is cheaply available even by including Rs 4,000 crore debt. Sesa Goa is one of a case, but overall I don’t think that I have my negative view on the non-ferrous metal stocks. Hindalco is just one of a case probably that maybe to do with the trading shorts or whatever we are seeing in the stock happening today.
Q: Orchid Chemicals has spiked up on some new drug development news. Have you tracked that?
A: I have only heard this news and this is going to be quite positive. I think it is from Europe region. Apart from that even forex losses should be helping the company, maybe new guidelines on booking of forex losses. It could be a combination of both these factors because stock has been seeing short sold positions existing in the system. Both these news put together may have had this positive effect on the stock price.
Q: The management of Hexaware indicated that they have seen lot of strength and from hereon as well things look quite strong. Ahead of the IT earnings season, is there anything in the midcap IT bunch that you would want to play for either with a shorter term or a medium term time horizon?
A: I don’t know whether I will be taking a positive call on Hexaware. When the company came out with September quarter results, a lot of trading interest or buying interest was seen and it went up to Rs 85-89. Since then it has been moving in a range. As far as two or three stocks where one can take a punt are concerned, one is Mphasis it looks good at Rs 300.
Second could be Rolta, it has taken a beating because of FCCB liability or debt concerns, that made it to correct a lot. Third could be Polaris because it has started showing some interest for last 15 days. I will keep on radar on these three rather than Hexaware because Hexaware has not been showing any trading movement for the last couple of months or so.
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