Brokerage firm, Motilal Oswal is betting on the stocks of Reliance Industries and ICICI Bank for good returns and has recommended buying the same. Both these companies declared pretty good quarterly numbers and Motilal Oswal sees a decent upside for these stocks. Let's take a look at why these stocks are a good bet at the current levels.
Buy ICICI Bank stock for a 23% upside target
Broking firm, Motilal Oswal has set an upside target of Rs 835 on the stock of ICICI Bank, which is 23% higher than the current market price of Rs 675.
Motilal Oswal has a buy on the stock of top private sector banking player, ICICI Bank. The bank reported strong earnings performance, led by robust core PPOP, aided by healthy NII growth (5bp NIM expansion). Also, lower provisions (23% below our estimate) drove the earnings beat v/s our estimate. The bank is thus progressing well towards earnings normalization, Motilal Oswal has aid in its report.
According to the brokerage, fresh slippages stood elevated at Rs 72.3 billion (annualized 4% of loans), pre-dominantly from the Retail/Business Banking portfolio. However, this was partially compensated by higher recoveries and upgrades. The GNPA/NNPA ratio grew by 19bp/2bp QoQ to 5.15%/1.16%. PCR remains stable at 78.4%, the highest in the industry. Restructured loans stood controlled at 0.7% of loans (v/s 0.5% in FY21).
"ICICI Bank holds COVID-19 related provisions of Rs 64.25 billion (0.9% of loans), despite utilizing provisions of Rs 10.5 billion in 1QFY22. It guided at improved asset quality trends mainly from 2HFY22. We marginally increase our FY22E PAT estimate by 4%. We maintain our BUY rating on the stock," Motilal Oswal has said in its report.
Broking firm, Motilal Oswal has set a price target of Rs 2,485 on the stock of Reliance industries, which is an upside of 18% from current levels. The company declared its quarterly numbers last week and accordingly EBITDA for the consolidated/standalone business rose 38%/61% YoY in 1QFY22 on a low base of last year (2% beat). On a QoQ basis, consolidated revenue/EBITDA is up -6%/1%. RJio's EBITDA was in line (up 23% YoY), while the same for Retail grew 79% YoY (6% beat) on a low base.
"Using SoTP, we value the O2C business at 7.5x FY23E EV/EBITDA, arriving at a valuation of Rs 776 per /share for the standalone business, and assign INR68 for its E&P assets. We ascribe an equity valuation of Rs 875 share to RJio at 20x FY23E EV/EBITDA and Rs 771 per share to Reliance Retail at 34x FY23E EV/EBITDA, factoring in the recent stake sale. We reiterate our Buy rating with a target Rs 2,485 per share," the brokerage firm has said.
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