Stocks To Buy From Motilal Oswal & Sharekhan For Up To 35% Returns

Buy Varun Beverages, says Motilal Oswal

Varun Beverages Limited is a key player in beverage industry and one of the largest franchisee of PepsiCo in the world (outside USA).

According to Motilal Oswal, with an increase in vaccine distribution and revival in out-of-home consumption, CY21 is expected to record a volume growth of 8%/25% as compared to CY19/CY20 levels, lower than 24% volume CAGR over CY14-19, as the business was affected by the lockdowns across India, due to the second COVID wave, during its peak season (April to June).

In May 2019, Varun Beverages acquired the franchisee rights to seven states – Gujarat, parts of Maharashtra, parts of Karnataka, parts of Telangana, parts of Andhra Pradesh, Kerala, and Tamil Nadu – in South and West India from PepsiCo. Prior to the acquisition, PepsiCo’s market share had dropped over CY16-19 and penetration levels in the region were low.

Recent launches to build momentum for Varun Beverages

Recent launches such as Sting and Mountain Dew – Ice are supporting volume growth and are expected to gain sizable mass in the medium-term.

“The company is expected to deliver strong volume growth across all the three product segments, with an increase in consumption patterns to pre-COVID levels. We expect strong demand traction over the next few years due to strong distribution network, rising penetration in the newly acquired region (south and west India), diversifying product portfolio, and growing refrigerator penetration in rural/and semi-rural areas per household and higher power availability hours. Our target price of Rs 1,150 implies a 27% upside. We maintain our Buy rating,” the brokerage has said.

Buy Inox Wind, says Sharekhan

According to Sharekhan, Inox Wind is expected to witness a turnaround in profitability, led by an improvement in order execution scale and better margins as the entire value chain in wind energy projects is expected to benefit from tariff stability and technological improvement (launch of 3.3 MW WTGs).

“Additionally, Inox Wind now focuses on improving the business mix to 75%/25% from wind turbine generator (WTG) equipment sale/turnkey projects by FY2023E-FY2024E. This would mean higher margins as well as a shorter working capital cycle. Overall, we expect EBITDA/PAT of Rs. 652 crore/Rs. 382 crore in FY2024E versus operating/net loss of Rs. 165 crore/Rs. 306 crore in FY2021,” the brokerage has said.

“We remain fairly confident on management’s strategy to turnaround the WTG business and monetisation of the O&M business, but any slippage on the same is key risk to our call, while early turnaround could further add to the upside potential. The stock is trading at 4.9x its FY2024E EV/EBITDA,” the brokerage has added. It has set a 35% upside target on the stock from the current market price of Rs 99.

Disclaimer

The above stocks are picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.