Markets are not very far from their peak highs and are down marginally, following the US Fed decision to indicate that rate hikes are coming as early as 2023. Over the last few quarters, Indian markets have had a one way rally and that is upwards. Here are 4 stocks that broking firm Motilal Oswal says to buy. We would advise investors to continue to remain circumspect on the markets and only invest in high-quality stocks.
The firm believes that the outlook for KEC International is improving and has therefore set a price target of Rs 475 on the stock. The company is India's second largest manufacturer of electric power transmission towers and one of the largest Power Transmission Engineering, Procurement & Construction companies in the world.
The shares of KEC International were last seen trading at Rs 408 on the Bombay Stock Exchange.
"At the current market price, the stock is trading at 16x/13x FY22E/FY23E EPS. We maintain our Buy rating with a target price of Rs 475 per share (15x FY23E EPS, marginally below its long-term one-year forward multiple of 15.8 times).
According to Motilal Oswal, the order inflow environment is improving, with a robust pipeline. "The momentum in order wins continued into the first quarter FY22, with KEC International winning Rs 30 billion worth orders in FY22 YTD (v/s Rs 7 billion YoY). Tenders under evaluation and in the pipeline stood over Rs 650 billion, thus indicating healthy potential order wins ahead," the brokerage has said.
LIC Housing Finance
Motilal Oswal is also bullish on the stock of housing finance company major LIC Housing. According to it, while the growth momentum has been strong, with healthy spreads, LIC Housing Finance has addressed the persistent concern on capitalization, with capital infusion from promoter LIC. However, deterioration in asset quality and elevated credit costs have continued to surprise us negatively, it has said.
"We reduce our FY22E Earnings Per Share estimate by 4% and increase our FY23E EPS by 3% to factor in higher Net Interest Income growth and elevated credit costs. We estimate 1.3%/14% RoA/RoE over the next two years, penciling in likely impact of the preferential allotment of fresh equity shares to the promoter. We maintain our Buy rating, with a price target of Rs 600 per share (1.2x FY23E book value per share)," the brokerage has said.
Shares of LIC Housing were last trading at Rs 493 on the NSE.
CESC is the first fully integrated electrical utility company and is generating and distributing power in Kolkata and Howrah. Brokerage firm Motilal Oswal is bullish on the stock and has indicated a price target of Rs 905 on the stock, which is a substantial uptick over the price of Rs 795 that the stock is currently trading at.
According to the brokerage firm, CESC's existing Distribution business generates high RoE and delivers steady growth. Generation assets generate healthy FCF. We raise our FY22E EPS by 9% to account for higher profitability at Haldia as the new tariff order is delayed. Even as visibility of earnings at Dhariwal improves, we factor in tightening of norms at Haldia and for the standalone entity in FY23E. The stock trades at an attractive 7.2x/6.9x FY22E/FY23E P/E.
"Untied generation capacity and scale-up of DFs have the potential to boost earnings. We value the stock at 8.5x FY22E P/E and maintain Buy with a target price of Rs 905," the brokerage has said.
Lemon Tree Hotels
Lemon Tree Hotels is another stock, where Motilal Oswal sees a significant up tick and has a buy rating. In fact, the broking firm sees an upside of nearly 23%.
"Revenue grew 39% QoQ in 4QFY21, led by 38% RevPAR growth, aided by a 16.9pp improvement in occupancy. EBITDA grew 42% QoQ due to lower flow-through, as the onset of a second COVID wave was sudden, which impacted demand. The company was unable to reduce expenses immediately. We have lowered our FY22E EBITDA estimate by 43% and have maintained our FY23E EBITDA estimate. We have a Buy rating on the stock with a target price of Rs 52 per share," the broking firm has said.
Shares of Lemon Tree were last trading at Rs 42.15 on the BSE.
The above mentioned stocks have been picked from the brokerage report of Motilal Oswal. The author, the brokerage or Greynium Information Technologies do not take any responsibility for losses that maybe incurred. The above article is for informational purposes only.