KEC International
The company believes the prospects for KEC International are improving and as such has set a price target of Rs 475 on the stock. The company is India’s second largest power pole manufacturer and one of the world’s largest power transmission engineering, procurement and construction companies.
KEC International shares were last trading at Rs 408 on the Bombay Stock Exchange.
“At the current market price, the stock is trading at 16x/13x FY22E/FY23E EPS. We keep our Buy recommendation with a price target of Rs.475 per share (15x FY23E EPS, slightly below its long-term forward multiple for one year of 15.8x).
According to Motilal Oswal, the order intake environment is improving with a robust pipeline. “The momentum in order winnings continued in the first quarter of FY22 with KEC International winning orders worth Rs 30 billion in FY2022 (vs Rs 7 billion YoY). Tenders in assessment and in the pipeline totaled over Rs 650 billion, indicating a healthy potential contract win ahead,” the broker said.
LIC housing finance
Motilal Oswal is also bullish on the stock of major housing financier LIC Housing. Accordingly, despite strong growth momentum with healthy spreads, LIC Housing Finance has addressed ongoing capitalization concerns with a capital injection from promoter LIC. However, deteriorating asset quality and increased borrowing costs continued to surprise us negatively, they said.
“We are reducing our FY22E EPS estimate by 4% and increasing our FY23E EPS by 3% to reflect higher net interest income growth and higher borrowing costs. We estimate 1.3%/14% RoA/RoE for the next two years, pencil drawing in likely impact of preferential allocation of new shares to Promoter. We maintain our Buy rating with a price target of Rs 600 per share (1.2x FY23E book value per share),” the broker said.
Shares of LIC Housing last traded at Rs 493 on the NSE.
CESC
CESC is the first fully integrated power company, generating and distributing electricity in Kolkata and Howrah. Brokerage firm Motilal Oswal is bullish on the stock and has given a price target of Rs.905 for the stock, a significant increase from the Rs.795 price at which the stock is currently trading.
According to the brokerage firm, CESC’s existing distribution business generates a high RoE and delivers steady growth. Generation plants generate a healthy FCF. We are increasing our FY22E EPS by 9% to reflect higher profitability at Haldia as the new tariff schedule is delayed. While earnings visibility at Dhariwal improves, we anticipate a tightening of standards at Haldia and for the standalone business in FY23E. The stock trades at an attractive P/E ratio of 7.2x/6.9x FY22E/FY23E.
“Untied generation capacity and ramping up DFs have the potential to increase yields. We value the stock at 8.5x FY22E P/E and remain Buy with a target price of Rs 905,” the broker said.
Lemon Tree Hotels
Lemon Tree Hotels is another stock where Motilal Oswal sees a clear uptrend and has a Buy rating. In fact, the brokerage firm sees upside potential of nearly 23%.
“Revenue grew 39% QoQ in Q4 2021, led by 38% RevPAR growth, supported by a 16.9 PP improvement in occupancy. EBITDA rose 42% QoQ on lower flow as the onset of a second COVID wave was sudden, impacting demand. The company was unable to reduce spending immediately. We have lowered our FY22E EBITDA estimate by 43% and maintained our FY23E EBITDA estimate.
Lemon Tree shares last traded at Rs 42.15 on the BSE.
Disclaimer
The stocks above were selected from Motilal Oswal’s broker report. The author, the brokerage firm or Greynium Information Technologies assume no responsibility for any loss that may arise. The above article is for informational purposes only.
