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2 Stocks To Buy That Can Zoom In The Short-Term

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Broking firm Motilal Oswal has come out with its latest report on Maruti Suzuki and Apollo Tyres. The broking firm sees gains of 26% returns on Maruti and 24% returns from Apollo Tyres. Let's tell you why the brokerage firm has a buy call on the stock.

 

Maruti: Targets 2 million vehicles in FY 2023

Maruti: Targets 2 million vehicles in FY 2023

In FY23, vehicle production will increase as the availability of semiconductors has improved. MSIL has also made further improvisations to enhance production. This, coupled with recently launched Brezza and Grand Vitara, will help it reach 2m units in FY23. "With an expansion and refreshment of its product portfolio, and offerings of new age features and fuel-efficient technologies, it is looking to regain its market share of 50% in the near future," Motilal Oswal has said in its report.

Maruti exports surge
 

Maruti exports surge

Exports grew 148% in FY22 as the semiconductor shortages did not majorly affect its export models. "Exports to Africa, particularly South Africa, grew 200% and accounted for ~50% of the total export volume in FY22, led by a better demand environment and its efforts in developing these markets over the past few years. Besides expanding its product portfolio and its reach, its best practices are being implemented to further enhance customer satisfaction," Motilal Oswal has said.

Maruti: Strong demand

Maruti: Strong demand

Strong demand and favorable product lifecycle for MSIL augurs well for market share and margin. "We expect a recovery in both market share and margin in 2HFY23, led by an improvement in supplies and mix, a favorable product lifecycle, raw material and forex benefits, and operating leverage," the brokerage has said.

The stock trades at 39x/23.5x FY23E/FY24E consolidated EPS. "We maintain our Buy rating with a target price of Rs 11,300 (27x Sep'24E consolidated EPS)," Motilal Oswal has said in its report.

Apollo Tyres: Buy for 24% gains

Apollo Tyres: Buy for 24% gains

Revenue grew 38% YoY to Rs 44.4 billion in 1QFY23 (v/s INR40.25b). Gross margin contracted 4.6pp YoY (-100pp QoQ) to 29.6% (v/s est. 29.5%), adversely impacted by raw material cost inflation (7-pp) that was offset by price hikes.

"Operating leverage drove QoQ margin improvement of 30bp (-70bp) to 9.7% (v/s est. 8.6%) in 1QFY23. EBITDA improved 29% YoY to INR4.3b (v/s est. INR3.5b). Adj PAT grew 52% YoY to Rs 1 billion (v/s est. Rs 120 million) in the quarter," the brokerage has said.

Apollo Tyres: EU performance

Apollo Tyres: EU performance

According to Motilal Oswal, EU manufacturing operations revenue rose 32% YoY to EUR151m (v/s est. EUR145m), led by 18% YoY volume growth. EBITDA margin contracted 190bp YoY (-100bp QoQ) to 14.4% (v/s est. 14.5%), hurt by RM cost and energy cost inflation during the quarter.

Valuations and view on Apollo Tyres

Valuations and view on Apollo Tyres

According to Motilal Oswal, among its tyre peers, Apollo Tyres offers the best blend of earnings growth and cheap valuations. "The stock trades at 15.4x/10.9x FY23E/FY24E consolidated EPS. Maintain buy with a target price of Rs 310 (based on 12x Sep'24E consolidated EPS)," the brokerage has said.

Disclaimer

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, and the author are not liable for any losses caused as a result of decisions based on the article.

Read more about: stocks to buy shares to buy
Story first published: Wednesday, August 17, 2022, 10:39 [IST]
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