Motilal Oswal Is Suggesting These 3 Stocks For Gains Over 24%

Buy Jindal Steel and Power: Motilal Oswal

According to the brokerage, despite the COVID-related delays, JSP's steel volumes increased by 21% in FY21, reflecting a utilisation rate of 88 percent. The company's announced 85 percent increase in steel capacity to 15.9 million tonnes per annum in stages by FY25, at a competitive cost of USD390 per tonne, should be RoCE accretive and support volume outperformance in the long run.

"We raise our FY22E EBITDA by 13% on expectations of higher steel prices in the fiscal. Strong cash flows, coupled with cash proceeds of INR30.1b from the JPL divestment, should lead to a fall in net debt to INR34.5b by FY23E, implying 0.3x FY23E EBITDA. We reiterate our Buy rating.

Our TP of INR495/share is based on 5x FY23E EV/EBITDA and factors in further net debt reduction of INR30.1b from the divestment of JPL. At the CMP, the stock trades at an attractive 4.5x FY23E EV/EBITDA," the brokerage has said.

 

Buy Motherson Sumi with target price of Rs 285

According to Motilal Oswal, exogenous problems in all of Motherson Sumi's businesses (COVID in India and supply-side issues in abroad businesses), significant copper price inflation, and non-recurring charges at PKC hampered the company's 1QFY22 performance.

"Our positive view on MSS remains intact (led by cyclical recovery, turnaround at the greenfield plant, and the execution of SMRPBV's strong order book). It trades at 28.8x/19x FY22/23E consol. EPS. Maintain Buy, with TP of ~INR285 (Sep'23 SOTP).

We cut our FY22E EPS estimates by 8%/3%, factoring in headwinds from the semiconductor We cut our FY22E EPS estimates by 8%/3%, factoring in lower production, while maintaining our FY23 EPS estimates. Our positive view on MSS remains intact (led by industry recovery, turnaround at the greenfield plant, and the execution of SMRPBV's strong order book). The stock trades at 28.8x/19x FY22/23E consol. EPS. As we shift our TP to Sep'23, which factors in total normalization as well as the peak cycle, we normalize the multiple for SMRPBV and PKC to 20x (v/s 23x earlier). Maintain Buy, with TP of ~INR285 (Sep'23 SOTP), the brokerage has said.

Buy Indian Hotels, Says Motilal Oswal

Motilal Oswal believes that, despite the second COVID wave, standalone RevPAR nearly doubled year over year due to ARR growth and occupancy increase, as the impact was less severe this time and the recovery was faster than the first. In addition, IHIN's operational performance was excellent.

The EBITDA margin of new revenue-generating avenues is better, and it is done without or with very little capital, which bodes good for RoCE.

"Revenue/EBITDA in 1QFY22 was above our estimate. Factoring the same, we have increased our FY22E revenue/EBITDA estimate by 2%/4%, and have maintained our estimate for FY23E. We maintain our Buy rating on the stock, with a Sept'23E SoTP-based TP of INR183.

While FY21 earnings are weak, we expect a gradual/sharp recovery in FY22E/FY23E on: a) a low base, b) improvement in ARRs 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, the brokerage has said.

Disclaimer

Views mentioned herein are taken from the brokerage report of Motilal Oswal. Neither the author, nor the brokerage nor Greynium Information Technologies would be responsible for losses incurred based on the article. Please consult a professional advisor. Investing in stock markets is risky.