The market consolidation is likely to continue in near term given weak global cues and mixed earnings so far - affected by cost inflationary pressure and supply side issues on margin.
"With skyrocketing valuations, many stocks prices have moved beyond comfort zone thus leaving very little margin of safety. On Monday investors would react to Reliance and ICICI Bank results along with global cues. Powell speech today would be keen tracked too. We would suggest traders to stay safeguarded, while investors should adopt cash deployment in staggered fashion," says Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.
Buy Indian Hotels, says Motilal Oswal
Motilal Oswal sees gains of nearly 27% on the stock of Indian Hotels and has a set a target price of Rs 268, as against the current market price of Rs 204.
"Indian Hotels standalone RevPAR nearly doubled on a QoQ and YoY basis owing to ARR growth and occupancy improvement. This came on the back of positive consumer sentiment on travel, leisure travel led recovery, and the resumption of business travel. Additionally, Indian Hotels operating performance was strong on account of cost-saving measures and operating leverage," the brokerage has said.
Indian Hotels board has also approved the purchase of 39.8% shares of Roots Corporation at a maximum acquisition cost of Rs 5 billion, consequently making Roots Corporation a wholly owned subsidiary of Indian Hotels.
Indian Hotels: Price target of Rs 204
"Revenue/EBITDA for the quarter came in above our estimates. Factoring in the same and better demand visibility, we increase our EBITDA estimates for FY22/FY23/FY24 by 29%/13%/11%. We maintain our Buy rating on the stock, with SoTP-based target price of Rs 268," on the stock.
"While FY21 earnings are weak, we expect gradual recovery in FY22E and sharp recovery in FY23E on (a) a low base, (b) improvement in ARR once normalization is achieved, (c) improved occupancies, (d) positivity in cost rationalization efforts in FY21, (e) an increase in F&B income as banqueting and conferences resume, and (f) higher income from management contracts. Recovery in business travel is key to watch out for going forward," the brokerage has said.
Buy Can Fin Homes, says Motilal Oswal
Can Fin Homes loan growth was recently muted due to extreme aggression from Banks and large housing finance companies.
"It navigated that period by compromising on its spreads/margin to protect its customers from being poached by the competition. That strategy has reaped dividends, and Can Fin Homes is again embarking on a strong growth trajectory without having to compromise on its spreads/margin. Despite the total restructured pool being slightly higher than the management's guided levels of 2%, its asset quality is the most pristine and credit costs should remain benign in a post-pandemic normalized world. We would look to revise our estimates and target post its concall on 22nd Oct'21," the brokerage has said.
The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.