Motilal Oswal, a brokerage firm, has identified Maruti Suzuki and SBI as equities to purchase for investors. Maruti Suzuki is expected to increase by around 20%, while SBI's stock is expected to increase by nearly 47%. According to the brokerage, both of these stocks have a high return potential. Below is a summary of the brokerage firm's fundamental research and reasoning for buying these stocks.
Buy Maruti Suzuki for profits of up to 20%
Motilal Oswal has recommended buying Maruti Suzuki shares at the present market price of Rs 6,848 with an upside target of Rs 8,200.
The brokerage says that while underlying demand is solid, the near-term picture is uncertain, due to semiconductor shortages and the lingering effects of commodity cost inflation, which are reflected in 2QFY22. We expect new product launches to restart after a two-year hiatus, with a combination of total product upgrades and new model launches. This should result in increased volume, market share, and a return to profitability. Profitability is nearing a nadir, and margins are likely to rise from 1HFY22's lows.
Strategy for net-zero emissions needs to be India focused
|Current Market Price||Rs 6,848|
|Target Price||Rs 8,200|
"We see scope for further improvement in dividend payouts and a resultant rerating. The stock trades at 36.4x/22.5x FY22E/FY23E consolidated EPS. We value the company at 27x Mar'23E consolidated EPS. We maintain our Buy rating, with a TP of INR8,200/share," the brokerage has said.
Buy State Bank of India for profits of up to 47%
Motilal Oswal has recommended buying SBI shares at the present market price of Rs 407 with an upside target of Rs 600.
According to Motilal Oswal, before the worst period of the corporate cycle impacted earnings, SBIN had consistently provided above 15% RoE for ten years, to the point where the bank posted back-to-back losses in FY17/FY18. In a difficult climate, it recorded a solid FY21/1QFY22 performance. Deposit growth remained strong, owing to positive CASA trends, but loan growth is expected to slow over FY22-23E. The outlook for asset quality is very promising. The management has increased the PCR to 68%. Continued profit growth would be bolstered by continued recovery.
|Current Market Price||Rs 407|
|Target Price||Rs 600|
Asset quality performance resilient in 1QFY22, despite the second COVID wave
"SBIN holds unutilized COVIDrelated provisions of ~INR91b, which should limit credit cost. SBIN has reported a RoE of ~9.5% in FY21 - the highest since AQR started in FY16 and is now aiming to reclaim 15% RoE in the medium term. We project a RoA/RoE of 0.8%/14.6% by FY23E, and reiterate SBIN as our top BUY with a TP of INR600/share (1.4x FY23E ABV + INR190/share from subsidiaries)," the brokerage has said.
Despite a difficult first quarter of FY22 due to the second COVID wave, the bank showed resilience, with fresh slippages of INR156.7 billion (annualised slippage ratio of 2.6 percent, which was lower than many private rivals).
Despite the fact that slippages were somewhat higher in July, led by the Retail/SME portfolio, management emphasised that a slippage worth INR48 billion had already been recovered/upgraded.
The article is informational in nature, which is taken from the brokerage report of Motilal Oswal institutional Equities. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.