2 Stocks To Buy From Motilal Oswal For Gains Of 21% to 29%

Buy State Bank of India

State Bank of India reported a steady quarter, with net earnings growing 67% YoY to Rs 76.3 billion (15% beat), aided by controlled provisions, as asset quality showed remarkable strength, despite the impact of the second COVID wave.

"It created a family pension provision of Rs 74.2 billion, instead of amortizing it over five years, thus prudently deploying one-off gains from the DHFL recovery and tax refund. The bank has fully provided for its exposure towards the SREI group," the brokerage has said.

The bank saw NPA/NNPA ratios improving by 42bp/25bp QoQ to 4.9%/1.5% as fresh slippage subsided to Rs 41.8 billion (66bp annualized). Restructured book remained in check at 1.2% of loans, while the SMA pool declined sharply to Rs 66.9 billion (27bp of loans).

State Bank of India: Buy for a price target of Rs 675

State Bank of India has reported a robust performance as it bravely fought off the COVID-19 impact and displayed remarkable resilience in asset quality performance.

"The bank has been reporting continued traction in earnings, led by controlled provisions. However, business trends remain modest, impacted by continued deleveraging by corporates. The bank has been able to maintain a strong control on restructured assets at 1.2% of loans, while the SMA pool has declined sharply," the brokerage has said.

Motilal Oswal sees a potential upside of almost 21% on the stock of Bharti Airtel from the current levels.

According to Motilal Oswal, the management is making the right noise in terms of steady market share gains, premiumization, cross selling through digital initiatives, and healthy inroads in non-Mobile revenue streams like payments bank, Home, and Enterprise segments. It expects 20% consolidated EBITDA CAGR over FY21-23E, along with tariff/consolidation to drive FCF/deleveraging.

"Bharti's superior execution quality is reflected in its strong performance in the last 8-10 quarters; 25% YoY growth in consolidated EBITDA, despite no tariff
hikes; and consistent subscriber and revenue market share gains," the brokerage has said.

Buy Bharti Airtel with a price target of Rs 875

Motilal Oswal sees a potential for a re-rating in both the India and Africa businesses on the back of steady earnings growth.

"We value Bharti Airtel on a Sep'22E basis, assigning an EV/EBITDA of 11x/5x to the India Mobile/Africa business, arriving at an SoTP-based target price of Rs 860. Our estimates do not factor in any upside from a tariff hike or steep market share gains from VIL's financial stress. We maintain our Buy rating," the brokerage has said.

Disclaimer

The above stock has been 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.