homemarket NewsFinancials offering valuation comfort; metal multiples looking attractive: Motilal Oswal
Financials offering valuation comfort; metal multiples looking attractive: Motilal Oswal
Gautam Duggad, Head of Research, Institutional Equities, Motilal Oswal Financial Services, on Friday, said that metal multiples have always remained attractive. According to him, deleveraging in metal stocks remains as the good part. Additionally, Duggad believes that financial space is the only place in the market that is offering valuation comfort.
Gautam Duggad, Head of Research, Institutional Equities, Motilal Oswal Financial Services, on Friday, said that metal multiples have always remained attractive. According to him, deleveraging in metal stocks remains as the good part. He further added that metals space proved to be the highest contributor in FY22 earnings.
In an interview to CNBC-TV18, Duggad said, “The multiples are cheap and lucrative but they have always been like that – the sector has never traded beyond 7-8 times on EV/EBITDA in the upcycle and has not gone below 3-4 times in a down cycle."
"The good thing is that there is a deleveraging, which is continuing. Some of the companies are likely to invest in capex, organic growth. So deleveraging might slow down a bit from hereon, but in the last two years we have seen massive deleveraging in almost all the big metal stocks,” he explained.
Duggad believes financial space is the only place in the market that is offering valuation comfort. He expects Nifty Bank’s earnings to go up over the next 2 years. “The only caveat that I have is our preference is still more towards the largecap financials because the mid and smallcaps are still not in the pink of their health,” he said.
On platform companies, he said that they will take a valuation hit as interest rates start to rise. He said, “Right now we do not have coverage on any of these names, but the view is that some of them are great franchises; they have built businesses over a period of time, their topline has grown in the last 4-5 years and they have a long runway ahead for growth. However, the problem is cash flows and earnings and the market is getting more concerned given the rate environment."
"So one has to be extremely adventurous to take a call on whether the bottom has been made or not. I would be in the camp which will wait for earnings and cash flows to emerge and stay sideways in some of these names because there is no compulsion to own these names; you can appreciate their business models while staying sideways,” he explained.
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First Published: Feb 18, 2022 12:02 PM IST
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