2 Stocks To Buy From The Defence & Financial Space According To Motilal Oswal

Motilal Oswal Institutional Equities has recommended buying the stocks of ICICI Securities from the brokerage space and Bharat Electronics Ltd from the defense space in its latest research report. The brokerage sees decent upside in both the stocks.

Buy ICICI Securities stock, says Motilal Oswal

The brokerage sees an upside on the stock to a level of Rs 915, as against the current market price of Rs 765.

According to Motilal Oswal Institutional Equities, the company aims to improve market share to 10% plus in new customer acquisitions and reduce the cost-to-income ratio by 500 basis points over the next four years to greater than 40%. "It would achieve this through a high degree of digital integration and developing new revenue streams. Eventually, ICICI Securities would move away from being just a broking company to offering the entire gamut of financial products," the brokerage has said.

The company is also looking to widen its customer base by targetting mutual fund business, insurance, and fixed income customers. According to Motilal Oswal this would propel the cross-sell ratio as well.

ICICI Securities: Valuations remain decent

According to the research firm, post the implementation of 100% margin norms from Sep'21, it expects some slowdown in cash volumes. Nevertheless, this could be partially offset by a surge in options volumes.

"Over the medium term - as seen empirically in the earlier phases of the margin norms - volumes are expected to recoup. ICICI Securities with its tech capabilities, is poised to see revenue and net profits CAGRs of 13.3% and 12.4%, respectively, over FY21-24E. We maintain our buy rating and a target price of Rs 915," Motilal Oswal institutional equities has said.

Buy Bharat Electronics for an upside target of Rs 240

The brokerage is also bullish on the stock of Bharat Electronics Ltd and sees an upside potential of almost Rs 240, as against the current levels of Rs 205. "With strong order prospects in place, the management is confident of an order inflow run-rate of Rs 150-170 billion in FY22. It expects revenue growth of 12-15% CAGR over the next 3-4 years, led by a strong order book, robust order inflows, and the Ministry of Defence's indigenization drive," the brokerage has said. According to Motilal Oswal Institutional Equities, the management is targeting annual maintenance contracts and certain civilian segments to scale up its revenue from services.

"As against 10-12% of Defense business revenue currently, it aims to ramp up its services revenue share to 25% over the next five years. We maintain our Buy rating. Higher growth in the non-Defense business poses an upside risk to our EPS estimates, while working capital deterioration presents a key downside risk to valuations," Motilal Oswal Institutional Equities has said in its research report.

Disclaimer:

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only and investors should exercise some discretion, given that the Sensex is near the 60,000 points level.