Here Are 3 Stocks To Buy That Top Broking Firm Motilal Oswal Is Bullish On

Broking firm Motilal Oswal is betting on the stocks of IndusInd Bank, Ultratech Cement and AU Small Finance Bank. Here are some of the reasons the brokerage has a buy on all the three stocks that it has recommended.

Buy for an 18% upside potential on the stock of AU Small Finance Bank

Motilal Oswal has set a price target of upwards of 18% on the stock of AU Small Finance Bank. AU Small Finance Bank reported a healthy performance in 2QFY23 with earnings supported by lower provisions and margins witnessing an expansion.

"On the business front, growth in advances was strong at 44% YoY while the traction in deposits remained healthy, especially savings account deposits. The bank carries contingent reserves of Rs 1.29 billion (25bp of loans), which coupled with 17% coverage on restructured assets provide comfort. We largely maintain our estimate as higher NII and lower provisions gets offset by higher opex, due to sustained investments in building the franchise. We estimate AU Small Finance Bank to deliver 25% earnings CAGR over FY22-24 with an RoA/RoE of 1.8%/14.9% in FY24E, respectively. We maintain our BUY rating, with a target price of Rs 700 (premised on 3.7x FY24E BV)," the brokerage has said.

IndusInd Bank: Buy for a 23% upside

From the current market price of Rs 1170, Motilal Oswal sees an upside of at least 23% on the stock. "IndusInd Bank's operating performance remains on track led by healthy NII growth and controlled provisions. Asset quality ratios improved driven by lower slippages in corporate as well as consumer portfolios. Thus, outlook for credit cost remains controlled. The management is guiding for continued momentum in loan growth and is looking to end FY23 with a growth of 20%. Healthy provisioning in the MFI portfolio and contingent provisioning buffer of 1.0% of loans will enable a steep decline in credit cost, thus driving a sharp recovery in earnings. We estimate PAT to report 40% CAGR over FY22-24, leading to 16% RoE in FY24E. We maintain our BUY rating with a target price of Rs 1,450 (premised on 1.8x FY24E ABV)," the brokerage has said.

Ultratech Cement: Stock best placed to capture recovery

According to Motilal Oswal, Ultratech Cement remains best placed to benefit from demand recovery, helped by its consistent capacity additions plans. "Cost-savings initiatives (higher green energy; scope for reducing lead distance, etc.) should help structural cost improvement. We reiterate our BUY rating on the stock," the brokerage has said.

According to Motilal Oswal, Increase in WHRS/Solar capacities (Green power usage to increase to 36% by FY25 v/s 20% in 2QFY23) along with the scope of reducing lead distance with better capacity planning will help manage cost.

Ultratech Cement: Target price of Rs 7510 on the stock

The stock trades at 14.2x/12.4x FY24E/FY25E EV/EBITDA (v/s its 10-year average one-year forward EV/EBITDA of 15.4x). "We reiterate our Buy rating on the stock by valuing it at 15.5x Sep'24E EV/EBITDA (v/s Jun'24 earlier). Our target price of Rs 7,510 offers an upside of 17% from current market price," the brokerage has said.