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2 Nifty Stocks That Motilal Oswal Has A Buy Call On
Markets have fallen a bit over the last week, with the Sensex now near that 59,000 points mark. Broking firm, Motilal Oswal has a buy call on the stocks of Maruti Suzuki and Larsen and Toubro, and sees good returns in both these stocks. Here is what the broking firm says on these 2 stocks.
Strong order book for L&T
According to Motilal Oswal L&T's order book grew 11% YoY to Rs 3.3 trillion, with the order book/revenue ratio at 3.2 times.
The international business formed 23% of order book. In terms of clientele, the central/state government formed 10%/33%, PSUs 42%, and the private sector 15% of the company's total order book.
"L&T has indicated that the bid pipeline remains strong, with the overall pipeline for the remainder of the year standing at Rs 6.8 trillion (+12% YoY). The Infrastructure sector's prospects stood at Rs 5.3 trillion, while the Hydrocarbon segment's prospects improved to Rs 1.2 trillion (80% of the prospective business is from the Middle East). The strong bid pipeline is encouraging, although a faster conversion to final awarding holds the key to the company meeting the guidance of a low-to-mid-teen growth in order inflow," the brokerage has said.
Buy L&T for a price target of Rs 2,285
According to Motilal Oswal After adjusting for the subsidiaries' valuation (Rs 1,070 per shares), the core E&C business trades at an FY22/FY23E PE multiple of 15.0x/12.9x v/s the historical one-year forward average PE multiple of 22 times.
"Should the stock revert to its historical average trading multiple of 22 times, our target price for the stock will increase to Rs 2,285. Larsen and Toubro remains the best play on the capital expenditure cycle in India. Maintain Buy," Motilal Oswal has said.
The shares of L&T last closed at Rs 1767 on the NSE.
Buy Maruti Suzuki
Motilal Oswal has set a price target of Rs 8,450 on the stock of Maruti as against the current market price of Rs 7,456. "Demand outlook remains good, with an improvement in both inquiries and bookings. Rural India is doing better and now constitutes over 43% of volume. It has an order backlog of 200k units due to a shortage of semiconductors," the brokerage has said.
According to Motilal Oswal, precious metal prices have seen some softening, but will benefit in coming quarters due to the lag effect.
Valuation and view on Maruti Suzuki
Strong demand, softening commodity inflation, and improving chip shortage supports a margin recovery.
"We expect a recovery in 2HFY22 in both market share and margin, led by a favorable product lifecycle, operating leverage, and mix as well as price action/cost-cutting," the brokerage has said.
"The stock trades at 59.1x/25.7x FY22E/FY23E consolidated EPS. We maintain our Buy rating with a target price of Rs 8,450 per share (27x Sep'23E consolidated EPS)," the brokerage has added.
Disclaimer
The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
