2 Stocks To Buy For Gains Up To 40% For The Long Term

Buy Gujarat State Petronet

Motilal Oswal Institutional Equities has set a price target of Rs 450 on the stock of Gujarat State Petronet as against the current market price of Rs 321.

"We expect spot LNG prices to return to normal levels post winter (i.e. end of FY22) as seasonal gas demand subsides, with supply constraints being resolved.

Reliance Industries has bought 8mmscmd (4.8mmscmd/3.2mmscmd in auction-II/III) of its own KG basin gas. Various companies (like GSPC, Essar Steel, and GSFC) have procured gas in two rounds of auctions. We believe substantial volume will flow to Gujarat and thus on the pipeline of Gujarat State," the brokerage has said.

 

Reasons to buy the stock of Gujarat State Petronet

Motilal Oswal says that it reiterate its belief that volumes for Gujarat State would jump to 44mmscmd in FY23 as the company is also a beneficiary of: a) the upcoming LNG terminals in Gujarat, and b) increased demand due to focus on reducing industrial pollution (Gujarat has five geographical areas, or GAs, identified as severely/critically polluted), and c) commissioning of Mehsana-Bhatinda pipeline.

"The stock trades at 16x FY23E EPS and 10x FY23E EV/EBITDA. Investments in Gujarat Gas and Sabarmati Gas, at 25% holding discount, offer a valuation of Rs 307. Valuing the core at 7x (long term trough valuation) adjusted Dec'23E EPS of Rs 20.5 and adding the value of investments, we arrive at a target price of Rs 450 per share," the brokerage has said.

Buy NOCIL, says Motilal Oswal

According to Motilal Oswal Financial Services the management guided that the priority would be to undertake debottlenecking at existing units in the near term, while long-term planning for the next 3-5 years is under evaluation. Specialized products form 25% of the total revenue, and any new capex announcement in this category would be both realization and margin accretive.

The brokerage has also recommended buying the stock of NOCIL. The firm has set a price target of Rs 320 on the stock, which is around 23% higher from current levels.

"The management continues to believe optimal capacity utilization for the expanded capacity (of 110ktpa) would be achieved by 1HFY24. Although, being conservative, we expect the same by end-FY24 (translating to a volume CAGR of 18%). Based on the aforementioned factors, we forecast a revenue/EPS CAGR of 26%/45% over FY21-24E," the brokerage has said.

"Valuing the company at 22x Dec'23 EPS, we arrive at Target Price of INR320. We reiterate Buy, with a decent upside on the stock. A key risk to our call would be further margin suppression hereafter if tyre import restrictions are lifted," the brokerage has said.

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal Institutional Equities. 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.