Buy SBI and VRL Logistics for 39-55% return in one year: Motilal Oswal

State Bank of India and VRL Logistics shares can give around 39-55% return in one year. Brokerage house Motilal Oswal has picked these stocks over companies' potential to achieve profitability gains and expansion plans. It sees an upside of 39% in state bank of India and 55% in the logistics company on March 24 closing prices of Rs 487 and Rs 445 respectively. 

State Bank of India | Target Price: Rs 675 

The brokerage is of the view that the public lender continues to strengthen its balance sheet and improve its return ratios.  

The management’s focus has been on building a granular, high-quality loan portfolio, while maintaining a strong focus on underwriting, which has aided a sustained turnaround in operating performance, it said.  

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"SBIN has been reporting strong overall performance led by a revival in loan growth, robust asset quality trends, and controlled funding costs. The asset quality outlook remains encouraging, with the slippage ratio lower than many Private Banks," said the brokerage.  

At 11am, shares of SBI were trading with nearly 1% gain to Rs 491.25 per share on the BSE. The scrip has jumped more than 35% in the past one year despite recent corrections in SBI stock price.  

VRL Logistics | Target price: Rs 690 

Motilal Oswal says the company's aggressive expansion plans will help volume growth. The transport and logistics company plans to open 90-100 branches in FY22 and similar number of branches in FY23.  

VRLL is well placed given its strong presence in the LTL segment, focus on branch addition, and tight cost control. Its comfortable Balance Sheet position and strong cash flow generation will enable it to meet its capex requirements for future growth. 

"With a pickup in demand and branch additions in untapped regions, we expect VRLL to clock 21% revenue CAGR over FY21-24E. With robust volume and cost efficiency measures, it will be able to maintain its EBITDA margin profile at 16% over the next two years. We maintain buy rating with a TP of Rs 690," said Motilal Oswal.  

Founded in 1976, VRL is one of the front runners in the Indian Passenger Travel Industry amongst the private sector players. It has spread its operations to Courier Service, Priority Cargo & Transport of Passengers by Air to meet the growing demands of its burgeoning customer base. 

VRL Logistics have rewarded handsomely to its shareholders as the counter has given around 100% return in the past one year.  

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)