The domestic brokerage house has picked two shares as the markets have started to trade back in the green. GAIL and Manappuram Finance are the two stocks the brokerage firm is betting on at this hour on the back of strong transmission, attractive valuation after correction, infusion of capital, and many others.
Motilal Oswal On Manappuram Finance
The company’s valuations are attractive as it trades at 7x price to earnings of FY27 after incorporating the total equity investments by Bain Capital over FY26 (and FY27). The brokerage firm maintained its Neutral rating on the stock with a target price of Rs 240. Bain Capital’s substantial capital infusion is expected to strengthen the company’s financial position. It will enable the company to enhance operational efficiencies and expand its footprint across its key segments, including gold loans, vehicle finance, MSME lending, and microfinance. The joint control of Bain Capital will provide strategic guidance and expertise, facilitating the company’s next phase of growth.
However, Motilal is a bit sceptical as it thinks that monitoring is needed for the execution under Bain Capital’s control as it will have to navigate the deeply ingrained processes and cultures at the NBFC to successfully deliver a turnaround. “The first step in this direction will be to identify and appoint a professional CEO (for MGFL standalone and, where needed, for its group companies), who can then build a strong senior management team,” according to the report by Motilal Oswal.
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GAIL’s share price has corrected 30% over the past five-and-a-half months, trading at 8.1x 1-year forward P/E. There is a limited downside for the company from here onwards as it has robust transmission volume growth, a steady marketing outlook, and a diversified petchem portfolio. The brokerage has maintained its ‘Buy’ call on the stock, with a target price of Rs 195. Motilal Oswal estimates a 7% compounded annual growth rate in transmission and marketing volumes over FY24-27. “The International Energy Agency (IEA) estimates India’s natural gas consumption to rise 60% by 2030 from 65bcm in 2023,” read the research note by the brokerage house.
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Further, IEA estimates India’s LNG consumption to grow at 11% p.a.
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