Motilal Oswal Recommends To Buy This Mid-Cap Stock For 47% Return

  • Reading time:5 mins read
  • Post author:
  • Post last modified:28/01/2022

By Lithin Reddy

Published: Friday, January 27, 2022, 11:34 [IST]

Motilal Oswal, one of the biggest brokerage firms recommended investors to buy the stocks of Orient Electric, for a 47% upside in 1 year. Orient Electric has already given exceptional returns in the last 1 year. the stock has given around 38% return in the last 1 year. The company has also shown a good profit growth of 23.20% from the past 3 years, the company also decreased its debt by 83.24 Cr, the company has been maintaining a healthy ROE of 25.95% over the last 3 years, maintaining a healthy ROCE of 33.08% over the past 3 years.

Target Price

Stock Outlook
Current Market Price (CMP)Rs. 339
Target PriceRs. 500
1 Year Return47%

Company Performance

The company’s revenue rose 10% YoY to INR6.8 billion. Two-year CAGR stood strong at 17%, while two-year revenue CAGR for Q3FY22 stood at 17% vs 27% for HAVL, earnings CAGR is better at 41% vs 24% for HAVL. EBITDA declined by 21% YoY to INR665m, EBITDA margin came at 9.8%, and adjusted PAT fell 27% YoY to INR381m. In the electrical consumer durables revenue rose 5% YoY to INR 4.8b. PBIT margin stood at 11.1% vs 14.9% last year and in lighting and switchgear segment revenue rose 25% YoY to INR2b, PBIT margin stood at 14.7% vs 14.6% last year.

Comments by Motilal Oswal

About the stock potential and share price target Motilal Oswal said, ‘ We maintain our earnings estimate as Q4FY22 is a seasonally strong quarter and should benefit from pre-buying. OEL is a strong operating leverage story, with margin expansion accompanied by an improving balance sheet. while two-year revenue CAGR stood at 17% vs 27% for HAVL, earnings CAGR is better at 41% vs 24% for HAVL. We forecast a revenue/EBITDA/PAT CAGR of 14%/22%/27% over FY22-24E. We value OEL at 45x FY24E EPS, with a target price of Rs. 500. At the CMP, the stock trades at an FY23E/Fy24E P/E of 38x/32x. Our longer-term thesis indicates a reduction in the margin differential between OEL and leading FMCG peers. On a FY24E P/E basis, OEL is trading at a discount of 34%/5% vs HAVL/CROMPTON, while its FY22-24E EPS CAGR of 27% is 2x of 14% each for HAVL/CROMPTON. On an EV/EBITDA basis, the discount stands at 44%/28%. We maintain our buying rating. Orient electric is our top pick in the consumer electrical space.

Also read: ITC share price target 2022, 2023, 2024, 2025, 2030.

About the company

Orient Electric is one of the leading consumer electrical brands in India with a diverse portfolio of fans, lighting, home appliances, and switch gears. Orient Electric today is the largest manufacturer and explorer of fans from India with more than 60% share in exports and a dominating presence in more than 35 international markets. It has the largest range of fans to suit varied aesthetic preferences and usage environments. Not only this, but it has also paved the way for pioneering developments in home appliances, lighting, and switchgear. Orient Electric is the largest manufacturer of LED lamps in India.

In home appliances category, Orient Electric offers a wide range of products including water heaters, air coolers, and small kitchen appliances.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal, investing in equity poses a financial risk, before investing please consult your financial advisor, we are not liable for any losses caused as a result of decisions based on the article.