Broking firm Emkay Global has suggested buying the stock of Minda Industries and Maruti Suzuki for gains of 27% and 20% respectively.
The brokerage has a target of Rs 840, as against the current market price of Rs 694, thus implying an upside of 20%. Minda Industries is the largest domestic supplier of Switches, Horns, Alloy wheels, Seating and Blow-molding. Further, it is the 2nd largest supplier of Airbags, Air filters, Speakers & Telematics, and the 3rd largest provider in Lightings segment. "We expect Minda to deliver overall revenue CAGR of 22% over FY22-24E. In Switches (28% of revenues in FY21), it should benefit from higher CPV due to the shift to premium models and import substitution. It has outpaced industry volume growth by 11pps in past 5-yrs, and we expect 4pps outperformance over FY22-24E," the brokerage has said. "Our Sep'22E target price of Rs 840 is DCF-driven and implies forward P/E of 32x. Minda deserves to trade at premium valuations, given its exposure to the PV segment, long term upside from electrical vehicle adoption and a sustainable upward re-set in return ratios," the brokerage has said.
Emkay global sees a 27% upside on the stock of Maruti and has a target of Rs 8,600 on the stock in a year's time. "We continue to believe that the industry will see an upcycle in the next 2-3 years, driven by improving macros, pick-up in replacement demand, positive rural sentiments and low interest rates. We expect Maruti to record a 20% CAGR during FY22-24E," the brokerage has said.
According to the brokerage Maruti Suzuki is likely to initiate an aggressive model action plan in the next two years to fill up the white-spaces like compact SUVs (above 4m), mid-size SUVs/MPVs and xEVs. Upcoming product launches are likely to include new generation Brezza, above-4m SUV, Jimny off-roader, MPV and strong hybrids. Maruti is collaborating with Toyota on products such as above-4m SUV, MPV and strong hybrids.
We reduce FY22/23 volume growth estimates by 15%/7% but retain the FY24 forecast. Following the revision, we expect revenue/earnings CAGR of 24%/61% over FY22-24E. We lower our Sep'22 target price to Rs 8,600 (Rs 9,000 earlier), based on 28x core P/E and net cash/share of Rs 1,541," the brokerage has said.
Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only and is picked from the brokerage report of Emkay Global. Be careful while investing as the Sensex is now close to the 58,000 points mark. Investors can invest small amounts and avoid putting lumpsum.