5 stocks with 1-year upside price potential up to 33%
The Indian equity markets are grappling with multiple challenges amid trade uncertainties, earnings slowdown and elevated valuations. These concerns have triggered relentless FPI selling. The market capitalisation of BSE companies fell below Rs.400 lakh crore on 18 February 2025 for the first time since June 2024. Since 26 September 2024, the total market cap of the exchange has fallen by Rs.79.3 lakh crore (16.6%). The key benchmark BSE Sensex closed at an all-time high on 26 September.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
Trump-Modi Meet
The mega MIGA, MAGA plans of India's Modi and US' Trump
Trump says India has more tariffs than others
Trump's 'golden rule' for imposing reciprocal tariffs
Diminishing possibilities of further rate cuts by the US Fed and rally in both the USD index and US 10-year bond yields are driving foreign funds away from emerging markets, including India. FPIs have sold over Rs.1.98 lakh crore of net equities since October last year (up to 20 February), according to data compiled from the NSDL website. The impact of the intense volatility over the past few months can be gauged by the current stock prices and their respective 52-week lows. Of the 3,020 listed companies, 1,419 (47%) are currently trading within the 15% range to their 52-week low prices.
The short-term outlook remains bleak due to the disappointing performance of India Inc. in the December 2024 quarter. The Nifty 50 PAT grew by 5% year-on-year, marking the third consecutive quarter of single-digit growth since the pandemic, according to data compiled from a recent Motilal Oswal report. Experts believe that the markets will see stability from the April-June 2025 quarter onwards. A recent Emkay report expects markets to stabilise from the first quarter of 2025-26 as worries around Trump tariffs will recede and discretionary consumption will recover. The consumption recovery in 2025-26, aided by easier monetary policy and improvement in employment trends, will put an end to the earnings downgrade cycle. The report expects Nifty 50 EPS to grow at 12-13% for 2025-26.
A Morgan Stanley report remains constructive on Indian equities, citing Budgetled boosts to consumption, capex, and fiscal consolidation as market positives.
However, given the near-term uncertainties, it is better to look for good quality companies from a long-term perspective. Efficiency, the ability to maximise output using resources, helps identify strong companies. Return ratios, which show earnings on invested capital, are a key measure of efficiency. These ratios reveal the money a company generates on the invested capital. Return on capital employed (RoCE) is one such well-known ratio. It is useful for analysing levered companies (with a capital structure consisting of both equity and debt). It measures the profit earned by a company relative to its total capital (equity and debt). It is calculated by dividing the EBIT (measure of operating profit) by the capital employed. Though companies with higher RoCE are preferable, it is also important to compare it with the weighted average cost of capital (WACC).
Artificial Intelligence(AI)
Java Programming with ChatGPT: Learn using Generative AI
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Basics of Generative AI: Unveiling Tomorrows Innovations
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Generative AI for Dynamic Java Web Applications with ChatGPT
By - Metla Sudha Sekhar, IT Specialist and Developer
Marketing
Performance Marketing for eCommerce Brands
By - Zafer Mukeri, Founder- Inara Marketers
Artificial Intelligence(AI)
Mastering C++ Fundamentals with Generative AI: A Hands-On
By - Metla Sudha Sekhar, IT Specialist and Developer
Finance
A2Z Of Money
By - elearnmarkets, Financial Education by StockEdge
Artificial Intelligence(AI)
Master in Python Language Quickly Using the ChatGPT Open AI
By - Metla Sudha Sekhar, IT Specialist and Developer
Office Productivity
Zero to Hero in Microsoft Excel: Complete Excel guide 2024
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
AI and Analytics based Business Strategy
By - Tanusree De, Managing Director- Accenture Technology Lead, Trustworthy AI Center of Excellence: ATCI
Artificial Intelligence(AI)
AI-Powered Python Mastery with Tabnine: Boost Your Coding Skills
By - Metla Sudha Sekhar, IT Specialist and Developer
Web Development
Advanced C++ Mastery: OOPs and Template Techniques
By - Metla Sudha Sekhar, IT Specialist and Developer
Astrology
Vastu Shastra Course
By - Sachenkumar Rai, Vastu Shashtri
Finance
Crypto & NFT Mastery: From Basics to Advanced
By - CA Raj K Agrawal, Chartered Accountant
Data Science
SQL for Data Science along with Data Analytics and Data Visualization
By - Metla Sudha Sekhar, IT Specialist and Developer
Legal
Complete Guide to AI Governance and Compliance
By - Prince Patni, Software Developer (BI, Data Science)
Web Development
A Comprehensive ASP.NET Core MVC 6 Project Guide for 2024
By - Metla Sudha Sekhar, IT Specialist and Developer
Technology
Certified Jenkins Professional
By - Vskills, India's Leading Certification Body
Office Productivity
Mastering Microsoft Office: Word, Excel, PowerPoint, and 365
By - Metla Sudha Sekhar, IT Specialist and Developer
Marketing
Digital marketing - Wordpress Website Development
By - Shraddha Somani, Digital Marketing Trainer, Consultant, Strategiest and Subject Matter expert
Web Development
Mastering Full Stack Development: From Frontend to Backend Excellence
By - Metla Sudha Sekhar, IT Specialist and Developer
Finance
Financial Literacy i.e Lets Crack the Billionaire Code
By - CA Rahul Gupta, CA with 10+ years of experience and Accounting Educator
Leadership
Business Storytelling Masterclass
By - Ameen Haque, Founder of Storywallahs
Marketing
Future of Marketing & Branding Masterclass
By - Dr. David Aaker, Professor Emeritus at the Haas School of Business, UC Berkeley, Author | Speaker | Thought Leader | Branding Consultant
WACC is the rate that a company pays to finance its assets. In other words, it is the return expected by shareholders and creditors. It is calculated by multiplying the cost of each capital source (debt and equity) by its relevant weight and then adding the results. It is also used as a discount rate in the discounted cash flow analysis.
Companies create value for investors if they generate RoCE higher than the WACC. We extracted data for RoCE and WACC for the past five years (2019-20 to 2023-24) from the Reuters-Refinitiv database. The companies with market caps greater than Rs.100 crore were considered. The financial stocks were excluded. The companies whose RoCE was higher than WACC in all five years were identified. There are 132 such companies, and this group has delivered an equal-weighted average point-to-point (or absolute) return of 198.9%.
Comparatively, the Nifty 500 index has delivered 109.3% in the same period. Of these 132 companies, 123(92.4%) delivered positive returns, whereas 70(53%) generated returns higher than the Nifty 500. These also outperformed the Nifty 500 index in the past three-year average returns. The analysis is based on 18 February 2025 closing values. The prospects of five such companies are analysed. The selected companies have the largest difference between RoCE and WACC in the latest financial year 2023-24. In addition, they are covered by a decent number of analysts and are currently offering a good one-year upside potential.
JB CHEMICALS AND PHARMACEUTICALS
The pharmaceutical companymet Reuters-Refinitiv estimates for EBITDA and PAT in the December 2024 quarter. While the EBITDA registered 14% year-on-year (y-o-y) growth, PAT grew by 21% y-o-y. The performance was supported by healthy traction in the domestic formulation business and recovery in the contract manufacturing business. However, export formulations declined due to lower revenue in the US and Russia.
The management expects double-digit growth across business segments and maintains focus on acquisition for expansion across business segments. While the India business growth will be aided by its strong presence in cardiology and gastroenterology, and growing footprint in paediatrics and ophthalmology, the CDMO business will be driven by the healthy order book and strong visibility of multiple new projects.
Analysts expect the company’s EBITDA margins to expand in the future due to operating leverage benefits, and list improvement in market share, focus on high growth segments and scaling up of the ophthalmology portfolio as key strongholds.
A recent Prabhudas Lilladher report expects the company’s growth momentum will be driven by the geographical expansion of legacy brands, improvement in MR productivity, scaling up of the Sanzyme, Azmarda and Razel franchises, new products launches, expansion of the contract manufacturing business and improved FCF generation.
DHANUKA AGRITECH
The agrochemical company reported revenue and PAT growth of 10% and 21%, respectively, on a y-o-y basis. While the revenue met Reuters-Refinitiv estimates, net profit surpassed estimates by over 8%. The performance was supported by volume growth amid strong demand for new products despite suppressed realisations. Moreover, a better product mix supported gross margins, which expanded by 136 basis points y-o-y.The management has revised its revenue guidance to 14% (from 16% earlier) for 2024-25, with 100 basis point EBITDA margin expansion. It expects volume growth to sustain in the March 2025 quarter, aided by traction in newly launched products. Besides, no major price corrections are expected in the next few months.
The company has acquired international rights for two products (Iprovalicarb & Triadimenol) from Bayer AG, which will help in expanding its footprint in the global markets across Latin America, Europe, the Middle East, Africa, and Asia (including India). Moreover, the acquisition will provide incremental revenue growth of 10-15% over the next five years.
A recent report from DAM Capital lists its differentiated and asset-light business model, scaling-up of Dahej capex (which will reduce technical dependence on China and open up new growth avenues like CRAMS), healthy FCF generation, and attractive return ratios as key strongholds.
CENTURY PLYBOARDS (INDIA)
The plywood manufacturer reported a robust performance in the December 2024 quarter, with a consolidated revenue growth of 21.7% y-o-y, driven by healthy growth in plywood and MDF segments. The revenue surpassed Reuters-Refinitiv estimates by 4.4%. The performance was healthy despite challenging macro conditions. Market share gains, aggressive sales strategies, deeper penetration in tier 3, 4 and 5 cities, and a rich product mix supported the performance.The management is hopeful of demand improvement in the future, led by the growing real estate sector. Though the raw material cost inflation will continue to create margin pressures in the near term, analysts expect a turnaround in the medium term.
The company is a beneficiary of the rising demand for furniture that is driven by rising disposable incomes, an increase in living standards, growing renovation activities, and a shift in consumer preferences towards comfort and aesthetics. Besides, reduced income tax burden (after Budget announcements) will help improve the demand environment in the future.
A recent report from Asian Markets Securities states that its brownfield and greenfield capacity expansion across verticals, innovative product basket, tie-up with experts like BCG, Vector consultants, McKinsey and wider addressable market bodes well for further scope of market share gains going forward. The benefits of enhanced capacity utilisation will be visible in 2025-26.
ORIENT ELECTRIC
The electrical equipmentmanufacturer reported a decent operating performance in the December 2024 quarter, with 9% and 12% y-o-y growth in revenue and PAT, respectively.The revenue growth was driven by ECD and lighting and switchgear segments. While increased demand for premium and decorative fans and festive season sales boosted the ECD segment, strong volume growth (despite LED price erosion) supported the lighting and switchgear segment.
Moreover, cost optimisation, favourable product mix and recent price hikes led to a 180 basis point expansion in gross margins on a y-o-y basis. The management continues to focus on innovation, premiumisation and new product launches. It expects margins to improve, led by operating leverage gains amid stabilisation of the Hyderabad plant. Also, the revenue in DTM (direct-to-market) states grew by 30% y-o-y.
A recent Ambit Capital report is constructive on the company due to its premium focus and unique SKU profile. Besides, it lists factors like transitioning of service network from master distributors to direct servicing, cost-saving initiatives, focus on product mix improvement across categories and new product development as key positives.
EPL
The speciality packagingcompany reported a muted revenue growth of 4% y-o-y in the December 2024 quarter, amid a weak performance of AMESA and EAP regions. While the AMESA growth was impacted by the demand slowdown in India and the devaluation of the Egyptian pound, EAP growth was hit by a weak macro environment in China.Despite sluggish topline growth, EBITDA margins remained strong and expanded y-o-y. Cost optimisation in Europe and America supported the margin expansion. The year-on-year expansion in RoCE and a decline in net debt to EBITDA are the other highlights of the December quarter’s performance.
The management has guided for a 20% EBITDA margin for 2025-26, led by mix improvement, strategic pricing and operating leverage gains in Europe and America. Capacity expansion in Thailand and Brazil’s beauty and cosmetic segment also support growth. The company is setting up a greenfield beauty and cosmetic tube plant in Thailand, which will provide opportunities to cater to the neighbouring countries, such as Indonesia and Malaysia.
A recent Systematix report lists the company’s focus on expanding its customer base in Brazil (which holds strong volume and margin growth potential) and leveraging sustainable products to capture a greater wallet share as key positives.
Current price as on 18 Feb 2025. Nifty 50 12-M forward PE: 20.4. WACC, RoCE data for 2023-24. Source: Reuters-Refinitiv
#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
This story originally appeared on: India Times - Author:Faqs of Insurances
