Broking firm, Motilal Oswal has recommended buying the stocks of Cyient and Mahindra CIE for good gains. The brokerage sees good likely profits in both these stocks.
Good financial performance of Mahindra CIE
Mahindra CIE's consolidated revenue grew 23% YoY (2% QoQ) to Rs 20.9 billion (estimated Rs 19.5 billion) in 3QCY21, led by a beat in India operations.
According to Motilal Oswal, revenue from the India business grew 33% YoY (22% QoQ) to Rs 11.4 billion (estimated Rs 10.3 billion). EBITDA margin improved by 100 basis points YoY (140 basis points QoQ) to 13.6% (estimated 13.4%).
"It is expecting lower than expected sales in 4QCY21 (v/s earlier estimates) due to ongoing semiconductor shortage. However, it is optimistic about growth in both India and the European region during CY22 and CY23, subject to semiconductor availability," the brokerage has said.
Buy the stock of Mahindra CIE
According to Motilal Oswal, Mahindra CIE's growth story is on track, driven by its organic initiatives (new products/customers).
"This, coupled with cost-cutting initiatives in both India and the EU, would drive margin expansion. Any significant order win or growth in the EV portfolio can act as a re-rating factor. The stock trades at valuations of 16.9x/13.9x CY21E/CY22E consolidated EPS. We maintain our Buy rating with a target price of Rs 300 per share (15x Sep'23E consolidated EPS)," the brokerage has said.
Buy the stock of Cyient
Cyient's 2QFY22 revenue grew 4.6% QoQ in USD terms (moderately higher than our estimate of 4% QoQ growth). This was led by broad-based growth in Services (+4.4%) and DLM (+5.4%).
According to Motilal Oswal, the recent acquisition of Workforce Delta contributed 0.7% to Services revenue in 2QFY22. The management retained its double-digit growth guidance in FY22 in the Services business, while DLM growth is expected to be 15-20% (v/s the 20% growth guidance earlier).
"We increase our EPS estimate for FY23 on a potentially better margin performance, led by the management's medium-term outlook. We maintain our Buy rating on attractive valuations. Our target multiple of 24x FY23E EPS takes our target price to Rs 1380 per share, implying an upside of 19%," the brokerage has said.
The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.