Buy These 3 Stocks, India’s Top Broking House Sharekhan Says

Markets began the week on a buoyant note and the momentum is likely to build going into the RBI's Monetary Policy Committee Meeting. "While the Index may be trading in a tight range, the gradual opening up of the economy and an improved demand backdrop do offer bottom-up opportunities. The primary market too continues with flurry of activity with as many as 4 IPOs lined up during this week and 3 more next week. Going ahead, the market is likely to continue to take support from ongoing corporate earnings season, upcoming RBI's MPC meeting and slew of macro data," says Says Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd. Here are 3 stocks that Sharekhan has recommended for investors.

Buy, the stock of Indian Oil, says Sharekhan

Top retail broker, Sharekhan has recommended the stock of Indian Oil, which is the India's largest oil retailer. The broking firms sees an improvement in margins, BPCL privatisation and solid dividend yield as the big positives.

Current market price	Rs 105
Target price	Rs 125

Estimates by Sharekhan on Indian Oil

	FY 2022	FY 2023
P/E	4.1	4.8
P/Book Value	0.8	0.8

 

 

 

Several positive triggers for Indian Oil stock

According to the broking firm, Q1FY2022 net profits at Rs. 5,941 crore was higher than its own estimates and street estimates, led by solid margins, particularly gross refining margins of $6.6/bbl.

Sharekhan believes that the strong earnings performance will sustain led by volume recovery (petrol/diesel at >100%/85-90% of pre-COVID level).

The likely structural improvement in auto fuel margin, cyclical recovery in GRM, sustained high petchem margin, and inventory gain are positives according to the brokerage.

"Maintenance shutdown at Paradip refinery will have a slight impact on Q2 refinery throughput. We retain buy on Indian Oil Corporation, with an unchanged target price of Rs 125 given attractive valuation (FY23E PE of 4.8x), earnings visibility, RoE of 17-18%, and dividend yield of 10%. Pipeline asset monetisation and BPCL privatisation are key re-rating catalyst," the brokerage has said.

 

Buy Laurus Labs: Sharekhan

Brokerage firm, Sharekhan also has a buy on the stock of Laurus Labs. The firm believes that Laurus Labs is well supported by capacity expansion plans and emerging opportunities from patent expiry of drugs. Strong topline growth prospects, visibility on earnings and healthy return ratios and low debt-equity are the key positives, according to Sharekhan.

Current market price	Rs 654
Target price	Rs 800

Estimates by Sharekhan on Laurus Labs

	FY 2022	FY 2023
P/E	26.8	22
ROE%	32.9	26.1

 

Why to buy the shares of Laurus Labs?

"The company is building new capacities that would support robust demand and also propel growth in the coming years. Emerging opportunities from patent expiry of drugs in areas of anti-diabetes and cardiology offer significant potential for Laurus and the company has been building capacities which could enable it to capitalize on the opportunity.

"The first quarter of FY 2022 was a strong quarter and basis the strong growth outlook we have revised our estimates upwards by 4% each for FY22E and FY23E. At current market price the stock trades at 26.8 times and 21 times its FY22E and FY23E EPS respectively. Strong topline growth prospects, visibility on earnings and healthy return ratios and low debt-equity are the key positives. We retain a Buy recommendation on the stock with a revised target price of Rs. 800," the brokerage has said.

 

Buy Tech Mahindra stock, says Sharekhan

Another stock that Sharekhan is suggesting to buy is the stock of Tech Mahindra. The brokerage house continues to prefer Tech Mahindra because of improving deal wins, 5G opportunities, and anticipation of stable margin performance.

Tech Mahindra is expected to report USD revenue/earnings CAGR of 11%/17%, respectively, over FY2021-FY23.

"We assume Tech Mahindra would continue to generate higher free cash flow (FCF) in the coming years, which would increase dividend/buyback payouts. We have a Buy rating on the stock with a revised price target of Rs. 1,300," the brokerage has said.

Current market price	Rs 1211
Target price	Rs 1300

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets are near record highs.