On March 17, the renowned brokerage firm Motilal Oswal announced a favorable Buy recommendation for two prominent stocks. This decision stems from a detailed analysis of both the companies’ business fundamentals and their stock valuations, showcasing their potential for growth in the near future.
Kirloskar Oil Engines: A Strong Contender
Kirloskar Oil Engines is poised to benefit significantly from its strategic pivot towards the mid to high kVA segments in the power generation sector. The company is also focusing on expanding its footprint in new industrial areas and enhancing its distribution channels. Moreover, the improved profitability of its B2C division is expected to yield positive results in the coming years.
- Key Insights:
- Shift towards higher kVA segments.
- Expansion in industrial markets.
- Enhanced distribution touchpoints.
According to Motilal Oswal, these initiatives are set to bear fruit over the next few years. They have slightly adjusted their forecasts for FY26 and FY27, reducing estimates by 4% and 6%, respectively, to account for marginally lower profit margins. Currently valuing the company at 25 times its earnings for March 2027, the brokerage believes that the existing stock price reflects undue pessimism regarding growth and margins. They maintain a Buy rating with a target price of ₹1,150.
Bharti Airtel: Telecom Leader
In the telecom sector, Bharti Airtel has emerged as a top pick for Motilal Oswal, especially following a recent tariff hike that boosted industry revenue by 4% sequentially and 15% year-on-year. This increase has made Bharti Airtel one of the primary beneficiaries, with its incremental remote monitoring system (RMS) soaring to 50% in just two quarters, compared to an overall RMS of 39%.
- Key Highlights:
- Significant revenue growth post-tariff hike.
- Leading position in average revenue per user (ARPU) growth.
- Strong quarter-on-quarter growth in adjusted gross revenue (AGR).
Motilal Oswal noted that the rise in data subscription proportions and minimum recharge hikes have significantly contributed to Bharti’s leading ARPU in the industry. The company reported a 5% increase in AGR, reaching ₹27,400 crore, while the average revenue per user climbed by 6% QoQ, reaching ₹23,800 crore.
The brokerage also highlighted Reliance Industries as another top pick in the telecom arena. They believe both RJio and Bharti Airtel are well-positioned to capture market share at the expense of competitors like Vi, thanks to their robust financial resources and superior free cash flow generation. Thus, Motilal Oswal continues to favor Bharti Airtel and Reliance in the telecom landscape.
In conclusion, both Kirloskar Oil Engines and Bharti Airtel present compelling investment opportunities, supported by strong fundamentals and market positioning.
