Motilal Oswal Institutional Equities has listed the stocks of NMDC and Bharat Forge to buy for gains that could be as high as 30%. The brokerage believes that the potential to generate returns in both these stocks is good. Here is some fundamental analysis from the brokerage firm and the reasons to buy these stocks.
|Current market price||Rs 171|
|Target price||Rs 220|
The brokerage has suggested buying this iron ore mining company's stocks with a target price of Rs 220, as against the current market price of Rs 171, implying an upside of nearly 30% on the stock. According to Sharekhan, NMDC is a play on strong iron ore prices and volumes.
The brokerage expects a strong (13%) volume Compounded Annual Growth Rate to 42 million tonnes over FY21-23E and higher iron ore prices, which should result in a 12%/16% EBITDA/PAT Compounded Annual Growth Rate over FY21-23E to Rs 111 billion and Rs 83.5 billion, despite a 22.5% premium levy on iron ore sales.
"We have factored in iron ore fines/lumps prices of Rs 5,500/Rs 6,400 per tonne in FY22E and Rs 4,500,Rs 5,200 per tonne in FY23E," the brokerage has said.
"We value the stock of NMDC at Rs 220 per share on a Sum of The Parts Valuation basis, valuing the iron ore business at 5 times FY23E EV/EBITDA and the steel plant 25% of its book value. At the current market price, the stock is trading at 3.7 times its core Iron Ore Mining business and provides an attractive dividend yield of 13%. We reiterate our Buy rating," the brokerage has said.
|Current market price||Rs 819|
|Target price||Rs 965|
The company is one of the largest forging companies in the world and Motilal Oswal is pretty upbeat on the stock.
According to the management interaction with the company by Motilal Oswal, despite semi-conductor issues, it expects recovery to sustain in India and exports. The company also has a comprehensive Electronic Vehicles strategy covering power electronics, control electronics, motors, etc. for all Auto sub-segments (from 2W to Buses).
"It has a comprehensive Electronic Vehicles strategy covering power electronics, control electronics, motors, etc., for all Auto sub-segments (from 2W to Buses)," the broking firm has said.
"Bharat Forge's strong performance in the first quarter of FY22 was driven by strength across segments as well as a better mix. While all core businesses are seeing sharp cyclical recovery, Bharat Forge diversified initiatives in aluminum, light-weighting, and e-Mobility are starting to fructify. We raise our FY22E consolidated Earnings Per Share by 16% to account for strong demand in the export markets, while maintaining our estimates for FY23E. We maintain our Buy rating, with target price of Rs 965 per share (28x Sep'23E EPS)," the brokerage has said.
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.