Motilal Oswal gave a moderate outlook for the overall market in a report released ahead of Diwali 2017.
NDTV Profit Team | Last Updated: October 18, 2017 11:06 (IST) NDTV Profit Team
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Motilal Oswal gave a moderate outlook for the overall market in a report released ahead of Diwali 2017
In the run up to Diwali 2017, brokerage Motilal Oswal has recommended five value stocks in the sectors of manufacturing, banking, housing finance and pharmaceuticals. These stocks are Birla Corporation, HDFC, RBL Bank, Manpasand Beverages and Granules India. Motilal Oswal gave a moderate outlook for the overall market in a report released ahead of Diwali 2017. "Lack of earnings visibility in the near term, coupled with moderation in macros, amid rich valuation crimps any material upside for the market in the near term. Expect the market to remain in a range, albeit with higher volatility as we enter the second quarter earnings season," said Yogesh Mehta, vice president, retail research, Motilal Oswal Securities Ltd.
Birla Corporation
According to the Motilal Oswal report, Birla Corporation - which gets 85 per cent of its revenue from manufacturing cement - is likely to touch Rs 1,150 in Samvat 2074 while it currently trades around Rs 1,005. "Given its size and profitability, the scrip is trading at a significant discount to peers (both on EV/ton and EV/EBITDA) and has strong potential for multiple re-rating, given its exposure to the lucrative markets of central India. However, the key risk would be lower profitability from its Chanderia operations on a sustained basis," said the Motilal Oswal report.
HDFC
On HDFC Ltd, the brokerage estimates a price target of Rs 2,020 while the current stock price hovers around Rs 1,763. "Over the past three quarters, corporate loan growth has also picked up smartly - this remains a key for overall spreads, considering individual spreads are under pressure," Motilal Oswal said on its report.
The third top pick by Motilal Oswal is RBL Bank, which is expected to hit the target price of Rs 651 against the current Rs 518.
"Management has guided for credit costs to be in the range of 70-75 bps for this fiscal. We largely maintain our earnings estimates for next fiscal," says the report on RBL Bank.
Manpasand Beverages
About Manpasand Beverages - the lone listed beverage company, Motilal Oswal says in its report that the stock has huge potential since it will benefit from its expanding distribution network in which a pilot for tie-up with Parle Products has been initiated in West Bengal, and should boost its distribution network leading to better capacity utilization.
The target price of Rs 534 has been set against the current price of Rs 445.
Granules India
The last pick is Hyderabad-based pharmaceutical company Granules India Ltd for which an ambitious target Rs 200 has been set against the current price of Rs 136.
"Over the last six years, company has reported 39 per cent earnings CAGR (compound annual growth rate) on improved profitability, higher operating leverage and superior business mix. It expanded its finished dosages business at a CAGR of 24 per cent over FY12-17, leading to higher profitability and improved utilization of the existing capacity of 18b tablets," said the report.
