2 Stocks To Buy From Motilal Oswal For Solid Returns

Broking firm Motilal Oswal has said to buy the stocks of VMART and Can Fin Homes in its latest research report. The brokerage sees good upside on both the stocks.

Buy VMART, upside target 18%

Motilal Oswal sees an upside of at least 18% on retailer VMART with a price target of Rs 3,880.

"VMART announced the acquisition of Arvind Fashions' Value Retail format 'Unlimited'. The deal could potentially add about 9% incremental equity value, i.e. Rs 309 per share. We see VMART's value and cost conscious approach as a silver lining in driving this turnaround," the brokerage has said.

The firm also believes that VMART is strongly positioned to compete with regional and national players in the Value Retail segment, given its better performance v/s national peers. Its strong liquidity (Rs 3.5 billion cash as of Mar'21, post the INR3.8b fundraise in 4QFY21), and prudent inventory management during the COVID-19 pandemic. This acquisition will provide further impetus to earnings growth, Motilal Oswal has said.

"We assign a 25x FY23E EV/EBITDA multiple to arrive at our target price of Rs 3,880 per share. Given the huge growth opportunity in the Value Fashion segment and VMART's strong execution capability, it has the potential to sustainably garner 25-30% EBITDA/PAT growth for a prolonged period, backed by over 20% revenue growth (SSSG + new store additions). We retain our Buy recommendation," the brokerage has said.

Buy Can Fin Homes stock

The Brokerage firm is also bullish on the stock of housing lender Can Fin Homes. The brokerage sees an upside target of at least 24% on the stock from the current levels. Can Fin Homes recently reported its quarterly numbers. The first quarter PAT was up 17% YoY to Rs 1.09 billion.

The quarter was characterized by low disbursements (due to lockdowns), high operating efficiency, and strong asset quality resulting in low credit cost.

According to Motilal Oswal the company has always exhibited a flair for cherry-picking high credit quality customers. It does this by right pricing the risk and delivering superior risk-adjusted asset quality and benign credit costs across credit cycles.

The firm also believes that it has a very strong liability franchisee which would come in handy when commercial paper borrowings have to be replaced. Can Fin Homes is poised for healthy loan growth, coupled with improving margins (hereafter). We estimate a 15% loan book CAGR over FY21-24E, with margins of 3.3% over this period. We model credit costs of 8-15bp and increase our EPS estimates by 2% for both FY22E/FY23E. Along with the ability to highly leverage its balance sheet, we expect strong RoE of 16% over the medium term. We maintain buy, with price target of Rs 660 per share (2.5x FY23E BVPS)," Motilal Oswal has said.

Disclaimer

The two stocks are picked from the brokerage report of Motilal Oswal. Investing in stocks is risky and investors need to be cautious. Neither Greynium Information Technologies Pvt Ltd nor the author, would be responsible for any losses incurred based on decisions made from the article. Investors are also advised caution as the markets are now at a record high.