A host of brokerages have come out with their views on India Inc’s September quarter results. Some corporates have managed to impress analysts, while some others — while missing the Street estimates — look good from a valuation perspective. A couple of such stocks may offer a potential up to 39 per cent upside going ahead.
Maruti Suzuki | Upside potential: 20%
Brokerage Nirmal Bang is building in a 350 basis points of margin expansion for Maruti Suzuki over FY22-25E. It sees demand for Maruti holding reasonably well, indicated by large pending bookings (4,12,000 units), of which 1,30,000 units pertain to the recently launched new models. On the EV front, it believes MSIL is lagging its competitors and is trying to navigate the transition through Hybrids. “Overall, we remain positive on Maruti and factor in EPS CAGR of 38 per cent over the next three years. We maintain BUY and value Maruti at 26 times September 2024 EPS with a target price of Rs 11,412.
IndianOil (IOC) | Upside potential: 39%
Motilal Oswal said IOCL is set to commission various projects over the next two years. The Panipat refinery project (25 mmtpa) is expected to be completed by September 2024, Gujarat refinery (18 mmtpa) by August 2023 and Baruni refinery (9 mmtpa) by April 2023, according to the earlier guidance.
Motilal Oswal expects a dividend payout to be around 51 per cent for FY23-24. The stock trades at 3.3 times consolidated FY24E EPS and 0.6 times FY24 price to book value. Motilal Oswal values the stock at 0.9 times FY24E price to book value to arrive at a target price of Rs 95.
Blue Dart | Upside potential: 29%
Nuvama Institutional Equities said Blue Dart Express (BDE) undershot on September quarter profit as higher ATF costs hit gross margin. Revenue (up 18 per cent YoY) met expectations, it said while noting that Blue Dart has continued to garner market share.
“While Q2FY23 is weak on profit, BDE expects improvement sequentially in H2FY23, even as new capacity comes on stream (new aircraft). We are cutting FY23E PAT by 8 per cent, but keeping FY24E earnings
and target unchanged at Rs 10,330. At FY24E PE of 33 times, 15 per cent growth and 40 per cent-plus RoE, we see the correction a good opportunity to add the stock,” it said.
Sona BLW Precision Forgings | Upside potential: 31%
Sona BLW’s Q2 revenue, Ebitda and Ebitda margin were ahead of Nomura India and Bloomberg consensus estimates. Raw materials to sales ratio higher at 47 per cent, offset by lower staff costs and other overheads. Nomura said global auto demand, especially in EU has been impacted due to economic slowdown, rising interest rates and energy prices. However, EV products’ preference and new launches are increasing in both India and globally.
“Hence, this should drive Sona’s EV revenue mix to rise to 55 per cent by FY25. Sona’s margins could potentially benefit by 200-300 bps from the PLI scheme,” the brokerage said while slashing its target on the stock to Rs 609. The target still suggests a 31 per cent potential upside.
High structural growth visibility and ROEs (25 per cent-plu) should continue to drive premium valuations, it said.
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