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Motilal Oswal picks these 10 stocks for long term, sees up to 33% upside

Britannia Industries, Orient Electric, Hindalco Industries, Tata Power and SBI Cards are among the top 10 buying ideas for the long term

April 20, 2021 / 11:39 AM IST
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The Nifty is expected to end fiscal 2021 with a healthy 13% earnings growth (EPS of Rs 533), the highest since FY11, despite the challenges posed by the COVID-19 pandemic, said Motilal Oswal Financial Services. As vaccination picks up further with the approval for more vaccines, we expect the focus to shift back to growth, cyclical recovery and fundamentals, the brokerage said.
ICICI Bank | CMP: Rs 575 | Target Price: Rs 770 | Upside: 33 percent | ICICI Bank reported a strong 3QFY21, led by robust operating performance, while strong asset quality trends enabled decline in provisioning expenses. Liability franchise continues to improve with cost of deposits declining to 4%, while the Balance Sheet remains fairly liquid and thus conducive for growth. We expect RoA/RoE to improve to 1.8%/15.2% for FY23E. Maintain buy.
ICICI Bank | CMP: Rs 575 | Target Price: Rs 770 | Upside: 33 percent | ICICI Bank reported a strong Q3 FY21, led by robust operating performance, while strong asset quality trends enabled a decline in provisioning expenses. 
SBI Cards | CMP: Rs 906 | Target Price: Rs 1,200 | Upside: 32 percent | While COIVD-19 has disrupted its growth trajectory, recovery has been fairly sharp and retail spends have exceeded pre-COVID levels. We estimate a loan book/earnings CAGR of 27%/47% over FY21-23E. We estimate RoA/RoE to improve to 6.6%/28.4% in FY23E. The stock is looking attractive given its strong fundamentals, earnings growth, and long-term structural story.
SBI Cards | CMP: Rs 906 | Target Price: Rs 1,200 | Upside: 32 percent | The stock is looking attractive given its strong fundamentals, earnings growth, and long-term structural story.
UltraTech Cement | CMP: Rs 6,539 | Target Price: Rs 8,110 | Upside: 24 percent | UltraTech’s 3QFY21 result was impressive on multiple counts. While it is ramping up its under-utilized acquired capacities, it also has a strong pipeline of expansion projects that offers strong growth visibility. We estimate a 14%/28% CAGR in consolidated EBITDA/PAT over FY20–23E, driven by a 7% volume CAGR and lower operating/interest cost.
UltraTech Cement | CMP: Rs 6,539 | Target Price: Rs 8,110 | Upside: 24 percent | We estimate a 14%/28% CAGR in consolidated EBITDA/PAT over FY20–23E, driven by a 7% volume CAGR and lower operating/interest cost.
Britannia Industries | CMP: Rs 3,693 | Target Price: Rs 4,575 | Upside: 24 percent | Immense structural opportunity, remarkable track record, RoEs of over 40% superior to most consumer peers, and an attractive risk reward ratio on FY23E earnings, leads us to be positive on Britannia. Maintain buy.
Britannia Industries | CMP: Rs 3,693 | Target Price: Rs 4,575 | Upside: 24 percent | Immense structural opportunity, remarkable track record, RoEs of over 40% superior to most consumer peers, and an attractive risk-reward ratio on FY23E earnings leads us to be positive on Britannia.
Divis Laboratories | CMP: Rs 3,783 | Target Price: Rs 4,450 | Upside: 17 percent | We reiterate buy on Divis Laboratories, encouraged by promising demand prospects and multiple growth levers – a) new product additions, b) a strong chemistry skill set, c) efficient manufacturing capabilities, d) scale-led advantage in legacy molecules, e) minimal financial leverage, and f) sufficient cash available for new projects.
Divis Laboratories | CMP: Rs 3,783 | Target Price: Rs 4,450 | Upside: 17 percent | We reiterate buy on Divis Laboratories, encouraged by promising demand prospects and multiple growth levers.
Gland Pharma | CMP: Rs 2,481 | Target Price: Rs 2,900 | Upside: 17 percent | Company is progressing well on building a complex product pipeline, backward integration, and gaining market share in commercialized limited-competition products. Accordingly, we expect a 25% earnings CAGR over FY20– 23.GLAND stands out in the pharma universe with solid track record of developing and commercializing complex products in the injectables space. Initiate buy.
Gland Pharma | CMP: Rs 2,481 | Target Price: Rs 2,900 | Upside: 17 percent | Gland stands out in the pharma universe with a solid track record of developing and commercializing complex products in the injectables space. 
Jindal Steel and Power | JSPL has ended the fiscal year on a strong note with sales hitting a new record of 7,86,000 tonnes in March 2021, up 61 percent YoY. Combination of robust domestic demand, attractive export markets (accounting for 38 percent of sales) and wide range of products have all contributed to JSPL reporting the steepest rise in monthly sales in FY21, said the company in its BSE filing.
Hindalco Industries | CMP: Rs 354 | Target Price: Rs 430 | Upside: 21 percent | The outlook for Novelis is positive due to resilience in the Beverage Can business and recovery in auto demand. 
HCL Technologies | CMP: Rs 992 | Target Price: Rs 1,285 | Upside: 29 percent | Higher exposure to IMS (over 30% of revenue), aided by strong demand for Cloud services, should help deliver over 14% revenue growth in FY22E. Broad-based sequential growth, coupled with healthy deal wins and a robust pipeline, indicates a good demand outlook. Given its deep capabilities in the IMS space and strategic partnerships, investments in Cloud, and Digital capabilities, we expect company to emerge stronger on the back of an expected increase in enterprise demand for these services. Maintain buy.
HCL Technologies | CMP: Rs 992 | Target Price: Rs 1,285 | Upside: 29 percent | Higher exposure to IMS (over 30% of revenue), aided by strong demand for Cloud services, should help deliver over 14% revenue growth in FY22E. 
Tata Power | CMP: Rs 94 | Target Price: Rs 120 | Upside: 27 percent | We maintain a buy on Tata Power taking into account: a) the recent takeover of Odisha DISCOMs, b) higher EPC profitability, c) benefits from the merger of CGPL and Tata Power Solar with itself, and d) higher valuations for the renewable business.
Tata Power | CMP: Rs 94 | Target Price: Rs 120 | Upside: 27 percent | We maintain a buy on Tata Power taking into account: a) the recent takeover of Odisha DISCOMs, b) higher EPC profitability, c) benefits from the merger of CGPL and Tata Power Solar with itself, and d) higher valuations for the renewable business.
Orient Electric | CMP: Rs 286 | Target Price: Rs 365 | Upside: 27 percent | Orient Electric’s 13.5% revenue CAGR over FY18-20 has outpaced Havells India (+7.6% CAGR) and Crompton Greaves Consumer Electricals (+5.9%). We forecast revenue/EBITDA/PAT growth of 20%/18%/21% over FY21-23E. Buy.
Orient Electric | CMP: Rs 286 | Target Price: Rs 365 | Upside: 27 percent | We forecast revenue/EBITDA/PAT growth of 20%/18%/21% over FY21-23E. Buy.
Rakesh Patil
first published: Apr 20, 2021 10:09 am

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