Buy Two Piramal Group Stocks, Stocks Can Jump Up To 41%, Says Motilal Oswal

Leading brokerage firm Motilal Oswal in its report published on October 10, 2022, has placed buy calls on two Piramal Group stocks. These two stocks are Piramal Enterprises Limited and

Piramal Pharma Limited. Piramal Pharma is a newly demerged entity, listed on the stock exchange in 2022. Here are the key takeaways from the report:

Piramal Enterprises Limited

Piramal Enterprises is a leading company of the Piramal Group. It is a large-cap financial sector company having a market cap of Rs 19,657.54 core. The brokerage has assigned a buy call to Piramal Enterprises Limited (PIEL) for a target price of Rs 1,160 per share. With the given target price, the brokerage sees up to 41% upside in the stock from its current level.

The stock is currently trading at Rs 824.25 per share, around 1.56% up from its previous close. The stock recorded its 52-week high level on 10 November 2021 at Rs 2,863.45 and the 52-week low on 17 October 2022 at Rs 786.15, respectively.

The stock has given 6.99% negative returns in 1 week. It has given 2.26% positive returns in 1 month. In the past 3 months, the stock fell, giving a massive 56.73% negative returns. Over a year it gave 69.59% negative returns. On long-term investments, the stock in 3 and 5 years has given massive 53.71% and 68.76% negative returns, respectively. The numbers indicate the stock has didn't performed well in terms of returns on investments in the past 5 years.

According to the brokerage, Over the past two years, PIEL has: a) strengthened its Balance Sheet by running down its Wholesale loan book; b) improved the texture of its borrowings, c) targeted lower-cost borrowings; and d) fortified itself against contingencies, with ECL provisions at 8.6% of AUM.

"Over the next three years, we expect PIEL to make meaningful inroads into Retail, led by Mortgages and complemented by shorter tenure loans originated through digital partnerships. Product diversification within Retail will help PIEL deliver strong growth and reduce concentration risks. We expect the business to deliver a consolidated RoA/RoE of ~2.3%/7-8% in the near term. We have cut our target multiple to 0.8x P/BV (earlier: 1x) for the Lending business. We arrive at our SoTP-based TP of INR1,160 (FY24E based) and maintain our Buy rating," the brokerage has said.

 

Piramal Pharma Limited

Piramal Pharma is a Pharmaceuticals sector company of Piramal group. The brokerage has placed a buy call on newly demerged entity Piramla Pharma Limited (PIRPHARM) for a target price of Rs 185 per share. Based on the given target price, the stock is expected to rise 33% from its current level in the next 12 months.

On NSE, the stock is currently trading at Rs 139.10 per share, 2.69% down from its previous close. The stock opened at Rs 144.95 per share. The 52-week high of the stock is Rs 200 per share recorded on 19 October 2022, and its 52 week low is Rs 136 recorded on 10 November 2022, respectively.

According to available data on NSE, the stock listing on 19 October 2022 and since its listing on the stock it has given 25.63% negative returns on investments. Yesterday, the stock fell by 0.73% and in a week it fell by 16.33%.

According to the brokerage firm, as a demerged entity, PIRPHARM reported its first quarter of detailed financials. The receipts from government grants have been included in other income and excluded from EBITDA and hence it is not comparable with our EBITDA estimate. Including other income, EBITDA stood at INR2.2b (est. INR2.3b). The moderate YoY growth in sales and increased OPEX affected profitability on a YoY basis. "We have recalibrated our FY23/FY24 earnings estimate based on: a) its detailed financials, b) prolonged period of pandemic-induced challenges in the Contract Development and Manufacturing Organization (CDMO) business, and c) improved traction in the Complex Hospital Generics (CHG) and the India Consumer Products (ICP) segment," the brokerage has said.

It added, "Using the SoTP methodology, we value PIRPHARM's CDMO/CHG/ICH business at 17x/12x/ 18x FY24E EV/EBITDA. We value its 49% stake in the Allergan JV at 18x FY24E P/E and arrive at an overall TP of INR185. While there are near-term headwinds in its CDMO business, the outlook remains interesting, given the pipeline of molecules in Phase III clinical trials, which can provide a commercial opportunity, subject to a successful regulatory approval. The revival in the CHG segment continues, with reduced COVID-related restriction. We maintain our Buy rating."

 

Disclaimer

The stocks have been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.