Motilal Oswal Institutional Equities has placed a buy call on the stock of Motherson Sumi and Indian Hotels in its latest reports.
Buy the stock of Indian Hotels
According to the firm, faster demand revival in the Leisure Travel segment has aided Indian Hotel's performance in FY21.
"The industry is expected to project accelerated growth in 2HFY22 across domestic and international hotels. Current demand from the leisure segment is high, while corporate bookings are also gradually picking up, leading to higher bookings in Ginger Hotels. The company also saw increased demand due to ‘staycation' demand in Tier I and II cities. This trend is expected to continue further, as the company saw a higher occupancy rate, followed by an increase in average rates. Revenge tourism has led to an increase in ‘staycation' bookings in metros. A similar trend is expected to continue in the medium-term," the brokerage has said.
Indian Hotels: International business witnessed traction
The company's hotels in London and Cape Town saw good demand during the last 10 days of 1QFY22.
"Indian Hotels has a presence in New York and San Francisco which have shown a higher resilience with respect to spread/control of COVID-19. The US government has allowed fully vaccinated people to travel, which in turn is expected to push international travel. In the medium term, the region is expected to perform well. In the US, revenue contribution from Banquets stood at USD30m on a top-line of USD80m. Currently, its Banquets are under renovation, thus no revenue will be recorded in FY22. Non-Banquet revenue (USD50m) is expected to grow sharply in the US," Motilal Oswal Institutional Equities has said.
Indian Hotels: Valuation and View: Faster demand
Faster demand revival in the Leisure Travel segment has aided Indian Hotels' performance in FY21. "Through its RESET strategy in FY21, Indian Hotels ensured: i) incremental revenue growth of Rs 2.6 billion, ii) spends optimization of Rs 4.2 billion, iii) effective asset management of Rs 700 million, and iv) financial prudence in corporate expenditure of Rs 1.4 billion. We expect a gradual/sharp recovery in FY22E/FY23E on: a) a low base, b) improvement in ARR once things normalize, c) improved occupancies, d) positivity in cost rationalization efforts in FY21, e) an increase in F&B income as banqueting/conferences resume, and f) higher income from management contracts. New revenue generating avenues have a higher EBITDA margin, and this is being done without deploying capital or with very minimal capital, which bodes well for RoCE. We maintain Buy rating on the stock," the brokerage has said.
Buy the stock of Motherson Sumi, says Motilal Oswal
Another stock that Motilal Oswal has recommended to buy is the stock of Motherson Sumi. "Acquisition of CIM Tools is a stepping stone for Motherson Sumi in the non-Auto space as outlined in Vision CY25, which targets USD9b revenue from the non-Auto segment. Motherson Sumi is looking to further expand in this space, through the organic and the inorganic route. The near term impact of the semiconductor shortage notwithstanding, our positive view on Motherson Sumi remains intact (industry recovery + turnaround in greenfield plant + execution of a strong order book of SMRPBV). The stock trades at 43.2x/21.5x FY22E/FY23E consolidated. EPS. We maintain our Buy rating with a target price of Rs 270 per share (Sep'23E SoTP)," the brokerage has said.
The above 2 stocks to buy are picked from the report of Motilal Oswal. Please note investing in stocks is subject to market risks and one needs to be cautious at this point of time as markets have gone-up sharply. Neither the author, nor Greynium Information technologies Pvt Ltd would be responsible for losses incurred based on a decision made from this article.