Motilal Oswal Top 2 Picks: Buy These Mid Cap, Small Cap Stocks For Return Up To 28%

Motilal Oswal has recommended investors to buy two stocks namely Motherson Sumi Wiring India Ltd and JK Cement Ltd. If you buy these two stocks now at their current market price, they can fetch you a maximum return up to 28%. Check key takeaways below:

1. JK Cement Ltd

The current market price of JK Cement is Rs 2750 apiece with 52-week high at Rs 3836 apiece and 52-week low at Rs 2005 apiece, respectively. The company has a market capitalisation of Rs 21,248 crore as of writing this report.

The mid-cap came into existence in 1994. The stock has given a return of 172% in 5-years and 145% in last 3-years. It has fallen 19% in one-year. Motilal Oswal has recommended buy to JK Cement with a target price of Rs 3170 apiece and a potential return of up to 14.94%.

JK Cement (JKCE) is increasing its grey cement capacity by 27% to 18.7mtpa by FY23-end, driving a CAGR of 11% in grey cement volume over FY22-25E. JKCE further intends to increase its grey cement capacity to 25mtpa by FY25E.

According to Motilal Oswal, "We value JKCE at 13.5x Sep'FY24E EV/EBITDA (premium to its five-year average one year forward EV/EBITDA of 12.5x) to arrive at our TP of INR3,170, an upside of 17% from its current levels. We upgrade the stock to Buy from Neutral."

We estimate further upside will be driven by 1) EBITDA growth (12% CAGR over FY22-25E); 2) improvement in profitability of grey cement business (estimate blended EBITDA/t of INR1,075/INR1,150 FY24E/FY25E); and 3) higher OCF, which will support expansion as well as deleveraging of its balance sheet, added Oswal.

2. Motherson Sumi Wiring India Ltd

The current market price of the stock is Rs 65 apiece with 52-week high at Rs 135 apiece and 52-week low at Rs 61 apiece, respectively. The stock has witnessed a sharp decline of 5.70% intraday. The company has a market capitalisation of Rs 26,100.33 crore.

The stock has a given a return of 33% in last 1-year and 19% in last 6 months. In last 3-months, it has jumped 7%.

Leading brokerage Motilal Oswal has assigned buy rating to Motherson Sumi with a target price of Rs 105 apiece and a potential return of up to 28%.

According to the brokerage, "The stock trades at 53.8x/33.5x FY23E/24E EPS. We believe it deserves rich valuations due to a) its strong competitive positioning, b) top decile capital efficiencies, and c) being a beneficiary of EVs and other mega trends in Autos. We reiterate our Buy rating with a TP of INR105 per share (~35x Dec'24E EPS)."

2QFY23 performance was adversely impacted by one-time costs incurred for new plants. While the new plants will weigh on near-term performance, strong demand is expected to drive strong revenue/PAT growth from FY24 onwards, added Oswal.

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.