Month: October 2021

Buy the stock of Indian Hotels

According to the firm, faster demand revival in the Leisure Travel segment has aided Indian Hotel’s performance in FY21.

“The industry is expected to project accelerated growth in 2HFY22 across domestic and international hotels. Current demand from the leisure segment is high, while corporate bookings are also gradually picking up, leading to higher bookings in Ginger Hotels. The company also saw increased demand due to ‘staycation’ demand in Tier I and II cities. This trend is expected to continue further, as the company saw a higher occupancy rate, followed by an increase in average rates. Revenge tourism has led to an increase in ‘staycation’ bookings in metros. A similar trend is expected to continue in the medium-term,” the brokerage has said.

Indian Hotels: International business witnessed traction

The company’s hotels in London and Cape Town saw good demand during the last 10 days of 1QFY22.

“Indian Hotels has a presence in New York and San Francisco which have shown a higher resilience with respect to spread/control of COVID-19. The US government has allowed fully vaccinated people to travel, which in turn is expected to push international travel. In the medium term, the region is expected to perform well. In the US, revenue contribution from Banquets stood at USD30m on a top-line of USD80m. Currently, its Banquets are under renovation, thus no revenue will be recorded in FY22. Non-Banquet revenue (USD50m) is expected to grow sharply in the US,” Motilal Oswal Institutional Equities has said.

Indian Hotels: Valuation and View: Faster demand

Faster demand revival in the Leisure Travel segment has aided Indian Hotels’ performance in FY21. “Through its RESET strategy in FY21, Indian Hotels ensured: i) incremental revenue growth of Rs 2.6 billion, ii) spends optimization of Rs 4.2 billion, iii) effective asset management of Rs 700 million, and iv) financial prudence in corporate expenditure of Rs 1.4 billion. We expect a gradual/sharp recovery in FY22E/FY23E on: a) a low base, b) improvement in ARR once things normalize, c) improved occupancies, d) positivity in cost rationalization efforts in FY21, e) an increase in F&B income as banqueting/conferences resume, and f) higher income from management contracts. New revenue generating avenues have a higher EBITDA margin, and this is being done without deploying capital or with very minimal capital, which bodes well for RoCE. We maintain Buy rating on the stock,” the brokerage has said.

Buy the stock of Motherson Sumi, says Motilal Oswal

Another stock that Motilal Oswal has recommended to buy is the stock of Motherson Sumi. “Acquisition of CIM Tools is a stepping stone for Motherson Sumi in the non-Auto space as outlined in Vision CY25, which targets USD9b revenue from the non-Auto segment. Motherson Sumi is looking to further expand in this space, through the organic and the inorganic route. The near term impact of the semiconductor shortage notwithstanding, our positive view on Motherson Sumi remains intact (industry recovery + turnaround in greenfield plant + execution of a strong order book of SMRPBV). The stock trades at 43.2x/21.5x FY22E/FY23E consolidated. EPS. We maintain our Buy rating with a target price of Rs 270 per share (Sep’23E SoTP),” the brokerage has said.

Disclaimer

The above 2 stocks to buy are picked from the report of Motilal Oswal. Please note investing in stocks is subject to market risks and one needs to be cautious at this point of time as markets have gone-up sharply. Neither the author, nor Greynium Information technologies Pvt Ltd would be responsible for losses incurred based on a decision made from this article.

Buy Indian Energy Exchange with upside of 18%

The Indian Energy Exchange (IEX) is the country’s leading electrical exchange, facilitating electricity transactions.

Long term outlook positive

ICICI Securities recommends buying this finance stock for a target price of Rs. 910 i.e. an upside of 18 percent from the last closing price of Rs. 770.

Target Price and Valuation of Indian Energy Exchange

“For the past year, IEX has remained richly valued given its clean balance sheet, near monopoly, regulatory tailwinds and introduction of newer products, which will drive strong double-digit volume growth in the medium term. We continue to remain positive and retain our BUY rating on the stock. Target Price and Valuation: We value IEX at Rs 910 i.e. 58x P/E on FY24E EPS,” the brokerage has said.

Reasons to consider:

• After the Supreme Court resolved a dispute between the Central Energy Regulatory Commission (CERC) and the Securities and Exchange Board of India (Sebi), electricity can now be traded on exchanges like other commodities, with forwarding contracts and derivatives.
• This agreement will pave the way for the implementation of longer-term delivery contracts on electricity exchanges, with IEX as a beneficiary.
• This will increase volumes while also introducing new products to the market.
• From FY24E onwards, a shift in power buying patterns from power purchase agreements (PPAs) to the short-term market, facilitated by MBED, is likely to result in a significant increase in volumes. This can help power exchanges like IEX gain traction 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 wiring harnesses, vision systems (mirrors), and plastic body parts.

ICICI Securities recommends buying this Auto Ancillary stock for a target price of Rs. 280 i.e. an upside of 17 percent from the last closing price of Rs. 240.

Reasons to consider:

• CIM Tools, a Bengaluru-based company that specialises in machining, treatment, sub-assembly, and testing of intricate aircraft parts, was acquired for a 55 percent interest. It had sales of Rs 129 crore in FY21and a backlog of orders worth >Rs 1,500 crore that can be fulfilled over the following five years.
• Through its 50:50 JV Ningbo SMR Huaxiang Automotive Mirrors, the company’s SMR subsidiary purchased a 60 percent stake in Nanchang JMCG Mekra Lang Vehicle Mirror Co. in China. In China, the latter produces mirrors for PVs, pickup trucks, and light and heavy CVs. The acquisition was carried out at a rate of 0.4x CY20 P/S.
• This company provides parts to automakers such as Ford and Isuzu.

Target Price and Valuation of Motherson Sumi

“MSS stock price has grown at ~10% CAGR from ~| 147 levels in October 2016, widely outperforming the Nifty Auto index. MSSL’s acquisition in the aerospace is strategic in nature wherein MSSL will now have access to marquee clients (Airbus, Boeing) in this space amid enhanced capabilities. This represents progress on outlined MSSL’s desire for diversification (non-automotive to form 25% of revenues in future). We retain BUY rating on the stock amid limited EV risk to its product profile.

Target Price and Valuation: Revising our forward estimates, we now value MSSL at Rs 280 i.e.30x P/E on FY23E EPS of Rs 9.3 (previous target price of Rs 270),” the brokerage has said.

Buy Indian Hotels with upside potential of 16%

Indian Hotels, with a room inventory of 19,425 rooms, has a diverse presence in the hotel sector, including brands such as Taj, Vivanta, SeleQtions, and Ginger.

ICICI Securities recommends buying this hotel stock for a target price of Rs. 240 i.e. an upside of 16 percent from the last closing price of Rs. 207.

Reasons to consider according to brokerage

• In the leisure destinations, the company is seeing a lot of demand for rooms. Some leisure destinations’ revenue per occupied room (RevPAR) has already surpassed pre-pandemic levels, indicating a positive trend along with an increase in the average length of stay from two to four days to five to seven days.
• From Q2 onwards, the corporate category, which had been a laggard due to the work-from-home culture until Q1FY22, is gaining traction.
• International destinations such as the United States, the United Kingdom, and Dubai are rebounding, with demand reaching 55-60% of pre-Covid levels in Q2 compared to 39% in Q1FY22.

Target Price and Valuation of Indian Hotels

“The balance sheet provides strong levers to growth while efficient operations would drive healthy margin expansion. We remain positive on the company and maintain our BUY rating. Target Price and Valuation: We value IHCL at Rs 240 i.e.31x FY23E EV/EBITDA,” the brokerage said.

Over FY21-23E, we anticipate a solid 62.9 percent revenue CAGR. Expect business to rebound to 93 percent of pre-Covid levels in FY23E, with EBITDA exceeding pre-Covid levels in FY23; margins to reach above 24 percent in FY23E, with the potential to reach 30 percent or higher. Improved cash flows, equity infusion, and disposal of non-core assets are all helping to keep debt under control.

Disclaimer

The above-listed stocks to buy are picked from the brokerage report. Please note investing in stocks is subject to market risks and one needs to be cautious at this point of time as markets have gone up sharply. Neither the author, nor Greynium Information technologies Pvt Ltd would be responsible for losses incurred based on a decision made from this article.

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a subsidized pension scheme for Indian senior citizens aged 60 years and above, offered by the union government. On behalf of the union government, the Life Insurance Corporation of India (LIC) administers the PMVVY for senior citizens. The uniqueness of the scheme is there is no upper limit of age considering the subscription of the scheme. The term of this pension scheme is 10 years. The total amount of purchase price under this Scheme allowed to a senior citizen cannot exceed Rs. 15 lakhs.

The interest rate or the rate of assured return

The government mentioned, the Pradhan Mantri Vaya Vandana Yojana (PMVVY) will provide an assured rate of return of 7.40% p.a. payable monthly (that is equivalent to 7.66% PA). You will get the benefit of the same interest rate that was fixed at the time of purchase for the entire 10 years policy term, even if the rate changes later. However, the interest rate has been changed by the government now. Earlier, this scheme was used to fetch 8.00% PA interest payable monthly. So, although the scheme will give you an assured income, the interest rate is being reduced now. However, it certainly gives better interest than few other investment opportunities.

The minimum and maximum pension available

The minimum and maximum purchase price

Benefits on survival

You can get the pension payment monthly/quarterly/half-yearly or yearly basis and the first installment of the pension you will get after 1 year, 6 months, 3 months, or 1 month from the date of purchase, according to your chosen mode of payment. As the tenure of the plan is 10 years, on survival of the policy term, pension in arrears will be paid to the subscriber, according to the payment mode chosen, like – monthly/quarterly/half-yearly or yearly. Additionally, on survival of the pensioner to the end of the policy term of 10 years, the purchase price along with the final pension installment will be paid by the LIC to the subscriber.

Benefits on death

If the pensioner dies during the policy, he/she will receive death benefits, mentioned in the plan. As the government mentions, “On the death of the Pensioner during the policy term of 10 years, the Purchase Price shall be refunded to the beneficiary.”

According to the government, the scheme will be available for sale up to March 31, 2023. Benefits on survival

You can get the pension payment monthly/quarterly/half-yearly or yearly basis and the first installment of the pension you will get after 1 year, 6 months, 3 months, or 1 month from the date of purchase, according to your chosen mode of payment. As the tenure of the plan is 10 years, on survival of the policy term, pension in arrears will be paid to the subscriber, according to the payment mode chosen, like – monthly/quarterly/half-yearly or yearly. Additionally, on survival of the pensioner to the end of the policy term of 10 years, the purchase price along with the final pension installment will be paid by the LIC to the subscriber.

Benefits on death

If the pensioner dies during the policy, he/she will receive death benefits, mentioned in the plan. As the government mentions, “On the death of the Pensioner during the policy term of 10 years, the Purchase Price shall be refunded to the beneficiary.”

According to the government, the scheme will be available for sale up to March 31, 2023. The Surrender Value payable under this Scheme will be 98% of the purchase price.