Buy Indian Energy Exchange with an 18% rise
The Indian Energy Exchange (IEX) is the country’s main electricity exchange, facilitating electricity transactions.
Positive long-term outlook
ICICI Securities recommends buying this financial stock for a target price of Rs. 910, an increase of 18% from the last closing price of Rs. 770.
Indian Energy Exchange Target Price and Valuation
âOver the past year, IEX has remained richly valued given its healthy balance sheet, near monopoly, regulatory favorable winds and the introduction of new products, which will result in strong volume growth at two medium-term figures. We continue to remain positive and maintain our BUY rating on the stock. Target Price and Valuation: We value IEX at Rs 910, which is 58x P / E on FY24E EPS, âthe brokerage said.
Reasons to consider:
- After the Supreme Court resolves a dispute between the Central Energy Regulatory Commission (CERC) and the Securities and Exchange Board of India (Sebi), electricity can now be traded on the stock exchange like other commodities , with transfer contracts and derivatives.
- This agreement will pave the way for the implementation of longer term delivery contracts on power exchanges, with IEX as beneficiary.
- This will increase volumes while introducing new products to the market.
- From FY24E onwards, a shift in power purchase models from power purchase contracts (PPAs) to the short-term market, facilitated by the MBED, is likely to result in a significant increase in volumes. This can help power exchanges like IEX gain ground in terms of volume growth.
Buy Motherson Sumi with upside potential of 17%
Motherson Sumi (MSS) primarily serves the global PV industry with key product lines such as wire harnesses, vision systems (mirrors) and plastic body parts.
ICICI Securities recommends buying this Auto Ancillary share for a target price of Rs. 280 which is up 17% from the last closing price of Rs. 240.
Reasons to consider:
- CIM Tools, a Bengaluru-based company specializing in the machining, processing, sub-assembly and testing of complex aircraft parts, was acquired for a 55% stake. It recorded sales of 129 crore rupees in FY21 and an order book worth over 1,500 crore rupees which can be fulfilled over the next five years.
- Through its 50:50 Ningbo SMR Huaxiang Automotive Mirrors joint venture, the company’s SMR subsidiary purchased a 60% stake in Nanchang JMCG Mekra Lang Vehicle Mirror Co. in China. In China, the latter produces mirrors for light and heavy PV, vans and CVs. Acquisition was performed at a rate of 0.4x CY20 P / S.
- This company supplies parts to car manufacturers such as Ford and Isuzu.
Course objective and valuation of Motherson Sumi
‘The MSS share price rose about 10% CAGR compared to about | 147 levels in October 2016, largely surpassing the Nifty Auto index. The acquisition of MSSL in aerospace is strategic in nature and MSSL will now have access to renowned customers (Airbus, Boeing) in this space amid enhanced capabilities. This represents a step forward from MSSL’s desire to diversify (non-automotive to form 25% of revenue in the future).
Target price and valuation: Revising our forward estimates, we now value MSSL at Rs 280, or 30x P / E on FY23E EPS of Rs 9.3 (previous target price of Rs 270), “said the house of brokerage.
Buy Indian hotels with upside potential of 16%
Indian Hotels, with an inventory of 19,425 rooms, has a diverse presence in the hotel industry, including brands such as Taj, Vivanta, SeleQtions and Ginger.
ICICI Securities recommends buying this hotel stock for a target price of Rs. 240, up 16% from the last closing price of Rs. 207.
Reasons to consider depending on the brokerage
- In leisure destinations, the company sees a strong demand for rooms. Revenue per occupied room (RevPAR) at some leisure destinations has already exceeded pre-pandemic levels, indicating a positive trend as well as an increase in the average length of stay from two to four days to five to seven days.
- Starting in the second quarter, the business category, which was lagging behind due to the work-from-home culture until the first quarter of fiscal 22, is gaining ground.
- International destinations such as the US, UK and Dubai are rebounding, with demand reaching 55-60% of pre-Covid levels in the second quarter, up from 39% in the first quarter of FY22.
Target price and rating of Indian hotels
âThe balance sheet provides strong levers for growth while efficient operations would lead to healthy expansion of margins. We remain positive on the company and maintain our PURCHASE rating. Price and valuation target: We value IHCL at Rs 240, or 31x FY23E EV / EBITDA “, the broker mentioned.
In fiscal year 21-23E, we anticipate a strong 62.9% revenue CAGR. Expect activity to rebound to 93% of pre-Covid levels in FY 23E, with EBITDA exceeding pre-Covid levels in FY 23; margins greater than 24% in fiscal 23E, with the potential to reach 30% or more. Improving cash flow, injecting equity, and disposing of secondary assets all help keep debt under control.
The stocks to buy listed above are taken from the brokerage report. Please note that investing in stocks is subject to market risks and caution should be exercised at this point as the markets have risen sharply. Neither the author nor Greynium Information technologies Pvt Ltd are responsible for any losses incurred based on a decision made from this article.