Markets are in a near consolidation phase with the Sensex hovering around the 53,000 points mark. Investors need to evaluate their portfolios and discard non-performers and add stocks that have the potential to generate superior returns. Some brokers like Motilal Oswal Institutional Equities are bullish on certain stocks and have given a "buy" rating. Here are 3 stocks that the brokerage firm has a buy on. Having said that, we believe that lumpsum investment in stocks at this juncture could be a lot risky, so invest with caution in the markets.
The brokerage sees a very decent up tick on the stock of Ashok Leyland from the current levels. The company is the second largest commercial vehicle manufacturer in the country behind Tata Motors. Recently, the Covid-19 related issues seem to have created some disturbance but the company seems back on track.
"Ashok Leyland faced challenges related to weak demand in in the first quarter of 2022. This time around, rural demand is low, but the management expects a rebound on the back of strong farm fundamentals. We expect demand recovery in commercial vehicles to sustain and gain momentum in FY22E," the brokerage says.
According to the firm, with recovery expected in FY22E/FY23E, on a low base of FY21, estimates domestic medium and heavy commercial vehicle volumes would recover to FY20 levels in FY22E and exceed the peak volumes of FY19 in FY24E.
Light commercial vehicles demand is likely to be aided by the e-commerce channel. The voluntary scrapping of trucks would boost commercial vehicles demand, although not substantially.
Why Ashok Leyland shares remain a good buy?
According to Motilal Oswal, Ashok Leyland remains a pure-play on the commercial vehicle cycle recovery. "Unlike the previous cycles, it is on a strong footing (lean cost structure and reasonable debt) and is focused on adding new revenue/profit pools. Ashok Leyland's revenue/EBITDA/PAT is estimated to post a 23%/44%/78% CAGR over FY20-23E on a low base of FY20. Valuations of 19.5x/10.4x FY22E/FY23E EV/EBITDA are at an early recovery cycle. We maintain Buy, with a target price of Rs 156 per share (12.8x FY23E EV/EBITDA)," the brokerage has said.
Shares of Ashok Leyland were marginally higher at Rs 127 in trade today.
Motilal Oswal Institutional Equities has set a price target of Rs 215 on the stock of NMDC.
NMDC is the leading iron ore mining player in the country. The company has recently benefited from iron ore mining prices going higher. There were also some reports of the company demerging its steel business, which should augur well for shareholders in the company. The steel plant of the company is also expect to start production in Dec 2021 according to the management.
"We expect the demerger to lead to value unlocking as the market is not ascribing any value to the steel plant currently. NMDC has invested Rs 180 billion in the steel plant. We expect a market valuation at 25% of the book value, i.e. Rs 45 billion (Rs 16 per share). We reiterate our Buy rating with a target price of Rs 215 per share," the brokerage has said.
Crompton Greaves Consumer Electricals
Motilal Oswal sees an upside of 15% on the stock of Crompton Greaves Consumer Electricals and has recommended buying the stock for good gains.
The company is a household name in India and one of the leading manufacturers of consumer products ranging from fans, light sources and luminaires, pumps and household appliances.
According to brokerage firm Motilal Oswal the company has consolidated its position in fans and pumps business, and has scaled up to the number two position in the Water Heaters segment. The two-year revenue CAGR stood at 12% in 4QFY21 (v/s 10% for Havells India), indicating strong performance.
"With its strong distribution network, we expect Greaves Consumer Electricals to capitalize on any pent-up demand emerging post the lifting of lockdown restrictions. Maintain Buy, with target price of Rs 515 per share (45x FY23E EPS)," the brokerage has said.
The shares of Crompton Greaves Consumer Electricals were changing hands at Rs 450 on the National Stock Exchange.
Investors are advised caution before investing in the stocks above and should only invest if they are able to bear losses. Greynium Information Technologies, the author and the brokerage firm should not be held liable for any losses suffered on account of the decisions based on the above article. Please consult a professional advisor.