Motilal Oswal Places A “Buy” On These 2 Stocks, Says 26% Returns Likely

Buy Birla Corporation for a target of Rs 1,740 on the stock

Birla Corporation is primarily engaged in the manufacturing of cement as its core business activity. It has significant presence in the jute goods industry as well.

The company plans to increase capacity by 30% over the next 12 months, which should support volume growth. Around 55% of its capacity is in Central India (a preferred market), which bodes well for the margin outlook.

Birla Corporation: Attractive on the valuations front

Birla Corporation first quarter results for FY 2022 was in line, with EBITDA growing by 47% YoY to Rs 3.4 billion, led by 39% growth in volume and EBITDA per tonne at Rs 1,026 (+6% YoY).

The ongoing 3.9 metric tonnes per annum greenfield expansion at Mukutban (to be commissioned in 4QFY22) provides strong volume growth visibility in FY23. While blended realization rose 3% year on year, to Rs 5,221 per tonne due to higher jute revenue, cement realization was flat year on year at Rs 4,943 per tonne (+2% QoQ).

"We expect a 14% earnings before interest, taxes, depreciation, and amortization Compounded Annual Growth Rate in FY21-23E, led by 14% volume Compounded Annual Growth Rate, as it expands capacity by 30% over the next 12 months. Valuation is also attractive at 7.4x FY23E EV/EBITDA. We reiterate our Buy rating," the brokerage firm has said.

Buy NOCIL Stock for 20% upside

According to Motilal Oswal, NOCIL reported higher-than-estimated realization (pricing action taken in Apr'21 to offset the increase in input cost), while volumes came in below estimates (as operating activity at the customer was interrupted for 2-3 weeks by the second COVID wave). This translated to in-line revenue, although margins expanded.

"The management has guided that with no further supply surplus in the market, NOCIL should be able to pass on the cost going forward as well, Factoring in the beat on realization and margins, we revise our respective variables, resulting in an upward revision in EPS by 31% and 14% for FY22E/FY23E, " the brokerage has said.

"As a result, we forecast a revenue/EPS CAGR of 28% and 47% over FY21-24E. Valuing the company at 22x Sep'23 EPS, we arrive at price target of Rs 340. Reiterate Buy," it further added.

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, Motilal Oswal 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.