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Motilal Oswal Bets On These 2 Stocks, Says Buy For Up to 35% Returns

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Broking firm, Motilal Oswal is betting on the stocks of Gas Authority of India (GAIL) and Apollo Tyres. It expects GAIL to generate returns of up to 35%, while Apollo Tyres can give returns of up to 30%, according to the brokerage firm. Let's see why the brokerage is bullish on these 2 stocks.

 

Buy Apollo Tyres stock for target price of Rs 290

Buy Apollo Tyres stock for target price of Rs 290

Current market priceRs 222.75
Target price Rs 290
Gains 30.00%

According to Motilal Oswal healthy demand momentum has been witnessed across key segments/key channels (except T&B OEM) since Jun'21 for Apollo Tyres. The brokerage says that the European Union operation margin is benefitting from the restructuring at the Netherlands plant. The pricing also offers some comfort for the company. Interestingly, Apollo Tyres raised the prices by 3-4% in the first quarter of FY 2021-22 and also raised the prices by another 3-4% in the month of July.

Capex and valuations of Apollo offer scope for appreciation in the stock
 

Capex and valuations of Apollo offer scope for appreciation in the stock

Capital expenditure in FY22 is estimated at Rs 20 billion at the consolidated level, with India business capital expenditure at Rs 18 billion (residual for the AP plant ramp-up and maintenance capital expenditure ) and Rs 2 billion for EU (for maintenance). It foresees the next leg of expansion for PCR in FY24 for addressing demand in India as well in the EU.

Apollo Tyres offers the best blend of earnings growth and cheap valuations. The stock trades at 12.3x/9.6x FY22E/FY23E consolidated EPS. We maintain our Buy rating with a target price of Rs 290 per share (12x Sep'23E consolidated EPS)," Motilal Oswal has said in its report.

Apollo Tyres is one of the leading tyre manufacturers in the country and abroad. It markets its products under our two global brands: Apollo and Vredestein. Apollo Tyres has multiple manufacturing units in India, the Netherlands and Hungary.

Buy GAIL for an upside target of 35%

Buy GAIL for an upside target of 35%

Current market priceRs 151
Target price Rs 200
Gains 35.00%

Brokerage firm, Motilal Oswal also has a buy on the stock of GAIL, with a target on the stock of Rs 200, from the current levels of Rs 151. GAIL is India's leading natural gas company with diversified interests across the natural gas value chain of trading, transmission, LPG production & transmission, LNG re-gasification, petrochemicals, city gas, E&P, etc.

According to Motilal Oswal GAIL reported an EBITDA in line with its estimate, as better performance in Gas Trading and LPG and Liquid HC business offsets lower profitability in the Petchem segment (impacted due to the planned shutdown in 1QFY22).

GAIL reported an EBITDA in line with our estimate, as better performance in Gas Trading and LPG and Liquid hydro carbon business offsets lower profitability in the petrochemicals segment (impacted due to the planned shutdown in 1QFY22). Valuing the core business at 10x Sep'23E adjusted EPS of Rs 15.7 and adding investments, we arrive at our target price of Rs 200 per share. The stock is trading at 8.8 times FY23E P/E and 5.7 times FY23E EV/EBITDA. We reiterate GAIL as our top pick in the largecap oil and gas space," the brokerage has said.

Disclaimer

Disclaimer

Investing in stocks 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. Investors should take care because the markets are at record highs, with the Nifty crossing the 16,000 points mark.

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