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Economic Times
4 days ago
- Business
- Economic Times
Motilal Oswal Picks 5 PSU stocks as top bets; says PSUs no longer underperforming
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Top PSU stock picks PSU recovery story Tired of too many ads? Remove Ads Valuation and outlook In its latest strategy report, domestic brokerage house Motilal Oswal has identified State Bank of India (SBI), Hindustan Aeronautics (HAL), Bharat Electronics (BEL), Power Grid Corporation , and Coal India as its top PSU stock ideas for long-term investors, stating that these are well positioned due to earnings visibility, strategic relevance, and strong Oswal's report notes that PSUs are no longer the underperforming segment they once were, having delivered strong earnings and market cap gains post-COVID. The BSE PSU Index has posted a 32% CAGR over FY20–25, significantly outpacing the 19% CAGR of the Nifty-50 in the same report emphasizes that while FY25 marked a period of moderation after the steep rally in FY24, several tailwinds remain intact.'Despite FY25 moderation, many structural factors remain intact: strong earnings base, policy tailwinds, and improved balance sheets,' it further adds that long-term investors should selectively consider PSUs, 'especially in BFSI, Capital Goods, and Infrastructure, based on earnings visibility and strategic importance.'State Bank of India (SBI): The largest PSU bank with strong return ratios, SBI remains Motilal Oswal's top pick in the BFSI space. The report notes a Return on Equity (RoE) of 18.6% for FY25, backed by healthy margins and credit Aeronautics (HAL): A key beneficiary of the government's Make-in-India push in defense, HAL is expected to deliver strong earnings growth with a 13.6% EPS CAGR over FY25– Electronics (BEL): With increasing defence capex, BEL continues to be a structural play in electronics and defence manufacturing, posting a robust 18.6% EPS CAGR for the projected Grid Corporation: As a core infrastructure utility, Power Grid offers a defensive growth opportunity with steady RoE (projected 18.4% in FY26) and strong visibility on regulated India: Despite being in a cyclical sector, Coal India is favored for its cash flow strength and dividend yield, and is seen trading at attractive valuations with a P/E of just 6.8x for report traces the transformation of PSUs over the past decade. During FY15–20, PSUs lagged the broader market, and the BSE PSU Indexunderperformed with a negative CAGR of 3.8%. However, between FY20–25, PSUs staged a dramatic comeback with earnings growing at 36% CAGR, aided by a turnaround in public sector banks and strong performance in capital goods and infrastructure particular, PSU banks turned profitable, moving from losses in FY20 to posting over Rs 2 trillion in profits in FY25, accounting for 38% of total PSU report also notes a significant reduction in the PSU loss pool: 'The contribution of loss-making companies to the overall profit pool has significantly diminished to just 1% in FY25 from 45% in FY18.'Valuations of PSUs have eased from their peaks. The BSE PSU Index P/E dropped from 13.8x in July 2024 to 11.7x in June 2025, though still above the low of 9.8x in February 2025. The current levels, the brokerage believes, reflect 'continued earnings growth, supported by underlying RoE expansion, strong macroeconomic conditions, a favorable policy environment, a robust order book buildup, and a significant turnaround in governance and operational efficiency.'Looking ahead, Motilal Oswal expects a 10% PAT CAGR over FY25–27 for its PSU coverage universe, which represents about 72% of India's PSU market cap. The growth is expected to be led by BFSI (53% contribution), Oil & Gas (20%) and Metals (12%).
Time of India
4 days ago
- Business
- Time of India
Motilal Oswal Picks 5 PSU stocks as top bets; says PSUs no longer underperforming
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Top PSU stock picks PSU recovery story Tired of too many ads? Remove Ads Valuation and outlook In its latest strategy report, domestic brokerage house Motilal Oswal has identified State Bank of India (SBI), Hindustan Aeronautics (HAL), Bharat Electronics (BEL), Power Grid Corporation , and Coal India as its top PSU stock ideas for long-term investors, stating that these are well positioned due to earnings visibility, strategic relevance, and strong Oswal's report notes that PSUs are no longer the underperforming segment they once were, having delivered strong earnings and market cap gains post-COVID. The BSE PSU Index has posted a 32% CAGR over FY20–25, significantly outpacing the 19% CAGR of the Nifty-50 in the same report emphasizes that while FY25 marked a period of moderation after the steep rally in FY24, several tailwinds remain intact.'Despite FY25 moderation, many structural factors remain intact: strong earnings base, policy tailwinds, and improved balance sheets,' it further adds that long-term investors should selectively consider PSUs, 'especially in BFSI, Capital Goods, and Infrastructure, based on earnings visibility and strategic importance.'State Bank of India (SBI): The largest PSU bank with strong return ratios, SBI remains Motilal Oswal's top pick in the BFSI space. The report notes a Return on Equity (RoE) of 18.6% for FY25, backed by healthy margins and credit Aeronautics (HAL): A key beneficiary of the government's Make-in-India push in defense, HAL is expected to deliver strong earnings growth with a 13.6% EPS CAGR over FY25– Electronics (BEL): With increasing defence capex, BEL continues to be a structural play in electronics and defence manufacturing, posting a robust 18.6% EPS CAGR for the projected Grid Corporation: As a core infrastructure utility, Power Grid offers a defensive growth opportunity with steady RoE (projected 18.4% in FY26) and strong visibility on regulated India: Despite being in a cyclical sector, Coal India is favored for its cash flow strength and dividend yield, and is seen trading at attractive valuations with a P/E of just 6.8x for report traces the transformation of PSUs over the past decade. During FY15–20, PSUs lagged the broader market, and the BSE PSU Indexunderperformed with a negative CAGR of 3.8%. However, between FY20–25, PSUs staged a dramatic comeback with earnings growing at 36% CAGR, aided by a turnaround in public sector banks and strong performance in capital goods and infrastructure particular, PSU banks turned profitable, moving from losses in FY20 to posting over Rs 2 trillion in profits in FY25, accounting for 38% of total PSU report also notes a significant reduction in the PSU loss pool: 'The contribution of loss-making companies to the overall profit pool has significantly diminished to just 1% in FY25 from 45% in FY18.'Valuations of PSUs have eased from their peaks. The BSE PSU Index P/E dropped from 13.8x in July 2024 to 11.7x in June 2025, though still above the low of 9.8x in February 2025. The current levels, the brokerage believes, reflect 'continued earnings growth, supported by underlying RoE expansion, strong macroeconomic conditions, a favorable policy environment, a robust order book buildup, and a significant turnaround in governance and operational efficiency.'Looking ahead, Motilal Oswal expects a 10% PAT CAGR over FY25–27 for its PSU coverage universe, which represents about 72% of India's PSU market cap. The growth is expected to be led by BFSI (53% contribution), Oil & Gas (20%) and Metals (12%).
Mint
4 days ago
- Business
- Mint
SBI, HAL to BEL: MOSL lists top PSU stocks to buy as valuations remain attractive
Indian public sector undertakings (PSUs) have experienced a remarkable revival in recent years, with Motilal Oswal Financial Services (MOSL) spotlighting their long-term potential in a detailed report. While FY25 brought in some normalisation after a stellar post-COVID run, MOSL says the foundational strength of PSU businesses remains intact. The brokerage believes select PSUs across banking, defence, and energy sectors remain well-positioned to generate wealth over the next several years. 'Our top PSU ideas are SBI, HAL, BEL, PowerGrid and Coal India,' said MOSL in its latest note. MOSL highlighted that PSUs delivered a compounded annual profit growth (PAT CAGR) of 36 per cent during FY20–25—higher than the 30 per cent reported by India Inc overall and far ahead of the private sector's 26 per cent. This robust profit performance contributed to a 32 per cent CAGR in the BSE PSU Index during the same period, significantly outpacing the Nifty50's 19 per cent CAGR. 'FY25 did witness some moderation,' MOSL acknowledged, noting that overall PSU profits dipped 2 per cent YoY, primarily due to weak performance in the Oil & Gas (O&G) sector. Excluding O&G, PSU profits rose 16 per cent in FY25, following a strong 23 per cent jump in FY24. BFSI, particularly PSU banks, was the key driver of profit growth in FY25, with PSU banks clocking a 26 per cent increase. O&G, by contrast, declined 44 per cent. 'This divergence illustrates the need to be selective in PSU exposure,' MOSL said, underlining that strength persists in sectors with structural tailwinds such as financial services, defence, and infrastructure. Importantly, the report shows that the PSU contribution to India Inc's overall profit pool surged to 37.5 per cent in FY25—up from just 29 per cent a year ago and only 18 per cent in FY20. 'The turnaround in PSU profitability is structural, not cyclical,' MOSL asserted. Valuations for PSU stocks have moderated since their peak. The BSE PSU Index's market cap hit ₹ 74 lakh crore in July 2024, then declined to ₹ 51 lakh crore in February 2025 amid a broader correction, before rebounding to ₹ 64 lakh crore in June. The current market cap stands 14 per cent below its all-time high, providing room for upside, according to MOSL. The BSE PSU Index now trades at a P/E of 11.7x, down from 13.8x in July 2024 and up from 9.8x in February 2025, suggesting more reasonable valuations. The PSU Index delivered a 10 per cent CAGR over the last decade (June 2015–June 2025), underperforming the Nifty50's 12 per cent CAGR. However, most gains came in the second half of the decade. The index contracted 9 per cent between 2015–2020, but rebounded with a strong 32 per cent CAGR from 2020 to 2025. Notably, the share of loss-making PSUs in the overall profit pool fell dramatically—from 45 per cent in FY18 to just 1 per cent in FY25. 'The PSU basket is no longer dragged by chronic underperformers,' said MOSL, noting a meaningful transformation in efficiency and governance. Looking ahead, MOSL expects a 10 per cent PAT CAGR for its PSU coverage universe over FY25–27. This growth will be led by BFSI (53 per cent contribution to incremental profits), followed by O&G (20 per cent), and Metals (12 per cent). Strategically, MOSL is bullish on select PSUs that benefit from policy tailwinds, Make-in-India initiatives, and infrastructure push. SBI remains a top pick due to robust credit growth and stable asset quality. HAL and BEL are favoured for their role in defence indigenisation, while PowerGrid benefits from power transmission investments. Coal India also finds favour due to its consistent cash generation and role in India's energy security.
Mint
4 days ago
- Business
- Mint
PSU stocks still attractive: MOSL lists top long-term bets including SBI, HAL, BEL
Indian public sector undertakings (PSUs) have experienced a remarkable revival in recent years, with Motilal Oswal Financial Services (MOSL) spotlighting their long-term potential in a detailed report. While FY25 brought in some normalization after a stellar post-COVID run, MOSL says the foundational strength of PSU businesses remains intact. The brokerage believes select PSUs across banking, defence, and energy sectors remain well-positioned to generate wealth over the next several years. 'Our top PSU ideas are SBI, HAL, BEL, PowerGrid and Coal India,' said MOSL in its latest note. MOSL highlighted that PSUs delivered a compounded annual profit growth (PAT CAGR) of 36 percent during FY20–25—higher than the 30 percent reported by India Inc overall and far ahead of the private sector's 26 percent. This robust profit performance contributed to a 32 percent CAGR in the BSE PSU Index during the same period, significantly outpacing the Nifty50's 19 percent CAGR. 'FY25 did witness some moderation,' MOSL acknowledged, noting that overall PSU profits dipped 2 percent YoY, primarily due to weak performance in the Oil & Gas (O&G) sector. Excluding O&G, PSU profits rose 16 percent in FY25, following a strong 23 percent jump in FY24. BFSI, particularly PSU banks, was the key driver of profit growth in FY25, with PSU banks clocking a 26 percent increase. O&G, by contrast, declined 44 percent. 'This divergence illustrates the need to be selective in PSU exposure,' MOSL said, underlining that strength persists in sectors with structural tailwinds such as financial services, defence, and infrastructure. Importantly, the report shows that the PSU contribution to India Inc's overall profit pool surged to 37.5 percent in FY25—up from just 29 percent a year ago and only 18 percent in FY20. 'The turnaround in PSU profitability is structural, not cyclical,' MOSL asserted. Valuations for PSU stocks have moderated since their peak. The BSE PSU Index's market cap hit ₹ 74 lakh crore in July 2024, then declined to ₹ 51 lakh crore in February 2025 amid a broader correction, before rebounding to ₹ 64 lakh crore in June. The current market cap stands 14 percent below its all-time high, providing room for upside, according to MOSL. The BSE PSU Index now trades at a P/E of 11.7x, down from 13.8x in July 2024 and up from 9.8x in February 2025, suggesting more reasonable valuations. The PSU Index delivered a 10 percent CAGR over the last decade (June 2015–June 2025), underperforming the Nifty50's 12 percent CAGR. However, most gains came in the second half of the decade. The index contracted 9 percent between 2015–2020, but rebounded with a strong 32 percent CAGR from 2020 to 2025. Notably, the share of loss-making PSUs in the overall profit pool fell dramatically—from 45 percent in FY18 to just 1 percent in FY25. 'The PSU basket is no longer dragged by chronic underperformers,' said MOSL, noting a meaningful transformation in efficiency and governance. Looking ahead, MOSL expects a 10 percent PAT CAGR for its PSU coverage universe over FY25–27. This growth will be led by BFSI (53 percent contribution to incremental profits), followed by O&G (20 percent), and Metals (12 percent). Strategically, MOSL is bullish on select PSUs that benefit from policy tailwinds, Make-in-India initiatives, and infrastructure push. SBI remains a top pick due to robust credit growth and stable asset quality. HAL and BEL are favoured for their role in defence indigenization, while PowerGrid benefits from power transmission investments. Coal India also finds favour due to its consistent cash generation and role in India's energy security. Overall, while FY25 marked a normalization phase for PSU stocks after an extraordinary post-pandemic rally, MOSL believes the long-term story remains compelling. 'With solid fundamentals, improving governance, and favourable policy tailwinds, PSUs deserve a spot in long-term investor portfolios,' the brokerage said. The transformation of Indian PSUs from inefficient state behemoths to efficient, growth-oriented enterprises is well underway—and investors who spot the structural shifts early could be handsomely rewarded. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Business Standard
5 days ago
- Business
- Business Standard
SBI to HAL: These PSUs merit long-term portfolio spot, says Motilal Oswal
SBI, BEL, HAL, Power Grid, and Coal India are among the top stock picks for Motilal Oswal Sai Aravindh Mumbai India's public sector undertakings (PSUs) deserve a place in long-term investor portfolios, as strong demand tailwinds persist while valuations have cooled off from their peak, according to Motilal Oswal Financial Services. Indian PSUs have been one of the most remarkable stories of Indian capital markets after Covid-19, the domestic brokerage said in a note on Thursday, adding that several PSU sectors posted a sharp turnaround in profit and created unexpected shareholder value. Listed companies delivered a strong earnings compound annual growth rate (CAGR) of around 30 per cent between financial year 2020 (FY20) and FY25, with PSUs growing even faster at 36 per cent, analysts at Motilal Oswal said. However, PSU earnings growth slowed in FY25 due to a high base from a sharp 43 per cent jump in FY24 and weaker performance in the oil and gas sector. This was also due to lower government capex, weak consumption trends, and volatility caused by geopolitical tensions, the note said. Growth optimism Although some cyclical moderation was seen in FY25, the key building blocks and supportive environment for sustained profitable growth in several PSUs remain intact, Motilal Oswal noted. Analysts expect a rebound amid increased government spending and continued focus on infrastructure and capex, stronger order books, and a favourable monsoon season. Further, the government's focus on localisation and the 'Make-in-India' initiative in the defence sector will continue to drive growth for industrial PSUs, it said. "We expect PSU contributions to earnings and market capitalisation to remain stable or improve going forward. Motilal Oswal estimates a 10 per cent profit after tax (PAT) compound annual growth rate (CAGR) for its PSU coverage universe. This growth will be largely driven by the banking, financial services and insurance (BFSI) and oil and gas (O&G) sectors, based on conservative assumptions from the FY25 base, it said. Sectors such as logistics, capital goods and metals are also expected to support earnings. Valuations cool The market capitalisation of the BSE PSU Index touched a record high of ₹74 trillion in July 2024. It then fell 31 per cent in February 2025 amid a broader market correction, before rebounding 25 per cent in June 2025. The index currently stands 14 per cent below its peak but is up 5 per cent in calendar year 2025 so far. Due to the correction between October 2024 and March 2025, the index's price-to-earnings (P/E) ratio declined to 11.7 times in June 2025 from 13.8 times in July 2024, Motilal Oswal noted. However, it has recovered from the February 2025 low of 9.8 times. So far this year, the BSE PSU index has advanced 2.4 per cent, underperforming the benchmark Sensex, which has risen by 6.4 per cent. Top stock picks State Bank of India (SBI), Bharat Electronics (BEL), Hindustan Aeronautics (HAL), Power Grid Corp., and Coal India are among the top stock picks for the domestic brokerage. Motilal Oswal expects BEL to deliver an 18.6 per cent CAGR in earnings per share (EPS) over FY25–27, while HAL is projected to grow at 13.6 per cent. SBI and Power Grid Corp are both expected to post EPS growth of 9.3 per cent, and Coal India is estimated to grow at 9.8 per cent.
