Buy Stocks: These 4 Stocks Can Rise Upto 27%, Gets A Buy From Motilal Oswal

Motilal Oswal, a leading brokerage firm has asked investors to buy stocks of four companies, as it believes the stocks of such companies will go up. The companies are; a private sector bank, a wealth management company, rubber chemical company and a specialty pharmaceutical company. Given below are details.

1. Buy shares of Indusind Bank Limited, with a price target of Rs 1,450 per share (potential upside 27%)

According to the brokerage firm, Indusind bank's operating performance remained on track, led by healthy net interest income growth and controlled provisions. The private bank has given guidance for continued momentum in loan growth and is hopeful that it would deliver more than 20% growth in the medium term fueled by continued market. This would help in gaining market share in its key domains, while also scaling up new business verticals and also aid the margins.

It is observed that the bank's asset quality remained steady driven by lower slippages while healthy provisioning in the MFI portfolio and contingent provisioning buffer of 0.8% of loans will enable a steep decline in credit costs, thus driving recovery in earnings. So, the brokerage has shared the estimate "We estimate PAT to report 28% CAGR over FY23-25 leading to an 18% RoE in FY25. We reiterate BUY with a target price of Rs 1,450 per share (premised on 1.7x Sep'24E ABV).

2. Buy shares of Ajanta Pharma, with a price target of Rs 1,410 per share (potential upside 16%)

After interaction with the management team of Ajanta Pharma limited, Motilal Oswal feels that the company has enhanced its efforts to improve profitability over the next 2-3 years. Superior execution in the branded generics segment across domestic formulation (DF), Asia and Africa would result in industry outperformance.

Further, the cost pressures are likely to ease from FY24 onward. AJP has cash to the tune of Rs 6 billion for inorganic growth opportunities. The relief on the cost front would pave way for at least 200bp margin expansion over FY23-25E.

According to brokerage, "We expect 15% earnings CAGR over FY23-25 v/s 4% YoY earnings decline in FY23. It is trading at 20x FY24E EPS of Rs 60 and 17x FY25E EPS of Rs 69. We continue to value Ajanta Pharma at 22x 12M forward earnings to arrive at our target price of Rs 1,410. It had multiple headwinds such as higher raw material costs and operating de-leverage over the past 12-15M, leading to historically lower margins in 9MFY23. However, with efforts in place to overcome these hurdles, there is scope of better margins from FY24 onwards. Maintain BUY.

3. Buy shares of 360ONE WAM with a price target of Rs 550 per share (potential upside 24%)

Motilal Oswal feels that over the past decade, 360ONE (erstwhile IIFL Wealth) has evolved and grown into one of the best wealth management franchises in India. It has become one of the biggest alternative asset managers with unique product offerings. The company intends to bring about a change the way wealth management is looked at in India by focusing on recurring revenue instead of the traditional approach of transaction-based revenue.

According to the brokerage, "We expect a 20% AUM CAGR in ARR during FY23-25, while TBR assets are expected to be flat. We currently bake in a decline in retentions for ARR and flat TBR. We estimate a PAT CAGR of 13%, with upside potential from higher income from transactions in unlisted shares as well as carry income. We maintain BUY with a 1-year revised target of Rs 550 (ex-bonus/split), based on 22x FY25E EPS v/s 25x Sep'24E EPS earlier."

Buy shares of NOCIL with a price target of Rs 280 per share (potential upside 25%)

NOCIL is the largest manufacturer of rubber chemicals in India, with a domestic/global market share of ~40%/~5%, respectively. Having a rich experience of over four decades, it is a one-stop shop and a dependable supplier of rubber chemicals.

Brokerage mentioned that the management has guided for de-bottlenecking in its existing units by Aug/ Sep'23, even as it evaluates its plans for the next three-to-five years. Currently, specialized products constitute 25% of its total revenue with limited room for expansion (industry standard is less than 10%). Further, management expects that Europe+1 could play out over medium term with no likely capacity constraints in near future.

Motilal Oswal observed that, despite global rubber consumption in CY22 had remained flat v/s CY21, due to the current global slowdown, NOCIL was able to maintain its market share during the period. "The stock is trading at 17.9x FY24E EPS of Rs 12.5 and 10.7x FY24E EV/EBITDA. We expect the return ratios to be stable at 12-14% in FY24-25. We reiterate our BUY rating on the stock with a target price of Rs 280 per share."

Share price details of the companies

Disclaimer:

The stocks have been picked from the brokerage report of Motilal Oswal, Greynium Information Technologies and the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.