2 Shares To Buy As Recommended By Motilal Oswal

Markets are down and really throwing opportunities for long-term investors to buy into high quality stocks. Here are a few stocks to buy according to broking firm, Motilal Oswal.

Gujarat Gas: Buy for a price target of Rs 650 per share

Broking firm, Motilal Oswal has recommended buying the stock of Gujarat Gas for long-term. The firm says that the company reported a beat on its EBITDA estimate, with higher EBITDA/scm (at INR7.8) due to lower than anticipated gas cost. Volumes stood at 9.9mmscmd in 4QFY22. It is currently clocking in volumes of over 10.5mmscm.

"The company's volume growth prospects remain robust with the addition of new industrial units, existing units undergoing expansions, and the emergence of a new ceramic cluster at Aniyari (potential of 0.5mmscmd). The Supreme Court order in its favor for Ahmedabad rural presents prospects of 0.8-1.2mmscmd over the next two-to-three years," the brokerage has said.

"We maintain our Buy valuing on the stock to arrive at our target price of of Rs 650 (at 26x FY24E EPS). Any underperformance in terms of EBITDA/scm or volume growth v/s our projection can pose a key risk for Gujarat Gas," the brokerage has said.

Buy Dalmia Bharat stock for an upside of 35%

Another stock that Motilal Oswal is bullish on is the stock of Dalmia Bharat. According to the brokerage Dalmia Bharat' s 4QFY22 performance was above its own estimates primarily driven by better realization (4% above estimates). EBITDA was at INR6.8b v/s estimated INR5.3b and OPM was at 20.2% v/s estimated 16.8%.

The Management of the company is internally working for growth plans beyond 48.5mtpa; however, due to the prevailing challenges (higher energy costs, supply chain issues on global geopolitical crisis, etc.), there will be a hiatus in new project announcement for some time.

Attractive on valuations

The stock trades at 11.0x/8.5x FY23E/FY24E EV/EBITDA with an EV/t of USD81/USD69, respectively. It has traded at an average EV/EBITDA of 10.4x/9.1x over the last five/10 years. With an expected improvement in earnings (15% CAGR over FY22- 24) and its focus on continuous capacity expansions, without leveraging its Balance Sheet, we expect the stock to trade at higher multiples, Motilal Oswal has said.

According to the management, aargins may come under pressure in 1HFY23E due to continued inflation in energy costs and a time lag to pass on the cost increases. 1HFY23E looks challenging in the current environment; but there should be an improvement from 2HFY23E.

"We value Dalmia Bharat at 12x FY24E EV/EBITDA to arrive at our target price of Rs 1,915 (v/s Rs 2,000 earlier), implying an upside potential of 35% from current levels. We maintain our BUY rating on the stock," the brokerage has said.

Disclaimer

Investing in stocks is risky. Please consult a professional advisor as investing in the stock markets. The author and Greynium Information Technologies Pvt Ltd, would not be responsible for losses incurred. The above stocks are picked from the brokerage report of Motilal Oswal Financial Services.