India's top broking firm Sharekhan with a significant amount of retail investors is betting on 2 stocks for long term returns. The first is the stock of Indian Hotels and the second is the stock of Mahindra Lifespace. Let's take a look at why the brokerage is bullish on these two stocks. First let us tell readers that the markets are highly priced at these levels and hence do thorough research before investing.
According to Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd equity markets so far has shown strong resilience even though it faces headwinds from the advent of a possible third COVID wave, persistent inflation readings prompting a potential rate increase, and volatility around the US Fed taper talk.
"It has been consolidating for quiet sometime due to lack of trigger. Q1FY22 earnings season has started off and would continue to provide stock specific action. Also it may give some direction to the market as investors would eye management commentary to gauge scale of economic recovery. Since restrictions this time around was localized and less stringent v/s the lockdown in CY20, we expect the impact in 1QFY22 to be contained. We expect earnings momentum to accelerate in FY22 as the pace of vaccinations picks up and the economy opens up further. Consistent earnings delivery v/s expectations are critical for further outperformance in our view," he says.
Sharekhan says that Indian Hotels has a strong focus on building an asset-light model and recovery in the business environment, which will help the hotel major to recover to 80% of pre-COVID levels in FY2023 and clock strong profitability.
"In FY2022, the company is focusing on keeping its balance sheet lean with no major capital investments. Stock is currently trading at 25x its FY2023E EV/EBIDTA. Any sustained improvement in the business fundamentals and reduction in debt as planned would further re-rate the stock. We maintain a Buy recommendation on the stock with a revised price target of Rs. 182. Among hotels, Indian Hotels is one of the better plays in the unlock theme due to a relatively stable balance sheet, strong room inventory and brand recognition," the brokerage has said.
The shares of Indian Hotels last closed at Rs 148, against Sharekhan's target price of Rs 182. This is at least a 25% upside from the current levels.
Mahindra Lifespace Developers
Real estate shares are soaring and Sharekhan says to "buy" this real estate stock. The firm has set a price target of Rs 795 on the stock.
"Mahindra Lifespace Developers is poised to scale up its sales and execution over the next two to three years with a strong management team at the helm of having a credible experience in its respective fields. Further, the company is expected to benefit from the government's relentless focus on affordable housing segments, rising affordability levels, favourable state government policies for real estate, and ample inorganic growth opportunities in the sector. The company's low gearing (current consolidated net debt to equity at just 0.07 times with 7.1% cost of debt) can be utilised to raise debt to fund inorganic expansion and land acquisitions. Overall, we believe MLDL is poised to generate strong presales and execution ramp-up over the next 2-3 years," the broking firm has said.
Investors are advised caution before investing in the stocks above and should only invest if they are able to bear losses. Greynium Information Technologies, the author and the brokerage firm should not be held liable for any losses suffered on account of the decisions based on the above article. Please consult a professional advisor.