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breaking news  Finances providing valuation comfort;  Attractive metal multiples: Motilal Oswal


Gautam Duggad, head of research, institutional equities, Motilal Oswal Financial Services, said on Friday that metals multiples have still remained attractive. According to him, the deleveraging of metal stocks remains the good part. He further added that the metals space turned out to be the biggest contributor to FY22 earnings.

In an interview with CNBC-TV18, Duggad said, “Multiples are cheap and lucrative, but they’ve always been that way – the industry has never traded above 7-8x EV/EBITDA in the up cycle and has not gone below 3-4 times in a down cycle. The good thing is that there is deleveraging, which continues. Some of the companies are likely to invest in capital expenditures. investment, organic growth So deleveraging might slow down a bit from now on, but over the last two years we’ve seen massive deleveraging in almost every major metals stock.

Duggad believes the financial space is the only place in the market that offers valuation comfort. He expects Nifty Bank’s revenue to grow over the next 2 years. “The only caveat I have is that our preference is even more towards large-cap financials because mid-caps and small-caps are still on the pink side of their health,” he said.

Regarding platform companies, he said they would take a valuation hit as interest rates start to rise. He said: “At the moment we don’t have any coverage on any of these names, but the view is that some of them are big franchises; they have built businesses over a period of time, their revenue has grown over the past 4-5 years, and they have a long trail of growth ahead of them. However, the problem lies with cash flow and earnings and the market is increasingly worried given the rate environment. So you have to be extremely adventurous to find out whether the bottom has been reached or not. I would be in the camp that will wait for revenue and cash flow to emerge and stay on the sidelines in some of these names because there is no obligation to own these names; you can enjoy their business models while staying on the side.

For more details, watch the attached video.


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