Updated: Dec 7, 2019
1. KEC International (Price: 264.50 Rs.): The government is increasing capital expenditure on transmission and distribution (T&D) projects, which is good news for KEC International, one of the leading engineering, procurement and construction (EPC) companies in the power transmission space. Out of its total orders of Rs 19,000 crore (around 1.7 times of its 2018–19 revenues), 51% are international orders. KEC continues to get regular orders from countries like Bangladesh, Nepal, Thailand, Malaysia, etc. SAE Towers, USA, a fully-owned subsidiary of KEC that caters to the American continent, is also doing well now and is expected to report 15% plus growth in the coming years.
The company’s forecast earnings growth (17.6% per year) is above the savings rate (7.6%) and revenue (13.5% per year) is forecast to grow slower than 20% per year. Its Return on Equity is forecast to be high in 3 years time (21%)
The company’s earnings have grown significantly by 31.3% per year over the past 5 years.
ROE: 22.36 % Free cash flow 5years: 2,655 Cr. Pledged percentage: 0.00 % Debt to equity: 0.76 Inventory turnover ratio: 17.35
2. Century Plyboards (India) Ltd. (Price: 164.30 Rs.): It is a leading player in the plywood and laminate segment. To cater to varied customer preferences, the company has widened its product portfolio with multiple products at various price points. The Company is also engaged in the logistics business through the management of a container freight station. In negative conditions also the Company has a good return on equity (ROE) track record: 3 Years ROE 21.79% which is way higher than its strongest competitors Greenply and Uniply.
The Company’s earnings (18.1% per year) are forecast to grow faster than the Indian market (18% per year).
ROCE: 17.81 % ROE: 17.50 % Free cash flow 5years: 368.28 Cr. Pledged percentage: 0.00 % Debt to equity: 0.54Inventory turnover ratio: 6.13 Promoter holding: 72.75 %
16 out of 28 Indicators are showing that this stock is bullish on the daily chart.
3. Cyient Ltd. (Price: 458 Rs.): It is engaged in providing software-enabled engineering and geographic information system (GIS) services. CYIENT’s reputation for being one of the best dividend payers in the market is supported by the fact that it has been steadily growing its dividend payments over the past ten years and currently is one of the top-yielding companies on the markets, at 3.3%. CYIENT seems to have put its debt to good use, generating operating cash levels of 1x total debt in the most recent year. The company has been maintaining a healthy dividend payout of 35.03%, Compounded Sales Growth of last 10 years is around 17.90%. In short, It has a Solid track record with an excellent balance sheet and pays a dividend.
On the valuation front, It is already trading at a premium but most of the IT companies with a considerable amount of growth trades 2–3x of its Intrinsic value.
CYIENT’s earnings growth over the past year (21.6%) exceeds its 5-year average (7.9% per year).
ROCE: 23.60 % ROE: 19.61 % Sales Growth (3Yrs): 14.28 % Free cash flow 5years: 1,205 Cr. Pledged percentage: 0.00 % Debt to equity: 0.14
Inventory turnover ratio: 29.36
4. Firstsource Solutions Ltd. (Price: 45.35 Rs.): Firstsource Solutions is engaged in the business of providing customer management services like contact center, transaction processing and debt collection services including revenue cycle management in the healthcare industry. It works with both the payer and provider segments of the United States healthcare industry. Stock is providing a good dividend yield of 4.40% and trading at 1.16 times its book value. Compounded Profit Growth of last 10 years is whopping 28.73% and Compounded Sales Growth of last 10 years is 8.14%.
On the valuation front, The company is highly undervalued. FSL is a good value based on its PE Ratio (8.2x) compared to the IT industry average (11.7x).
Intrinsic value (Based on DCF Model) : 68.11 Rs. Market Price: 45.35 Rs.
FSL’s earnings have grown by 11.8% per year over the past 5 years.
ROCE: 15.20 % Sales Growth (3Yrs): 14.28 % Free cash flow 5years: 1,071 Cr. Pledged percentage: 0.00 % Debt to equity: 0.20 Interest Coverage: 13.09
5. Exide Industries Ltd. (Price: 190 Rs.) There are two companies in India that covered almost 60% market share in Batteries, Exide and Amara Raja. Soon electric vehicles are the future of automobiles industries and these two companies are likely to get maximum orders. Exide is the largest manufacturer of automotive and industrial lead-acid batteries in India and the fourth-largest in the world. Trading is trading 19x FY20 earnings and with 10% eps growth and Industry PE 18, The stock will be valued at 252 Rs. which is a 27% upside from the current market price of 190 Rs.
The company’s earnings growth over the past year (12.3%) exceeded the Auto Components industry -4.3%.
On the valuation front, Exide is trading at attractive valuations with P/E of 19.3 times/18.9 times FY20E/FY21E, underpinned by reasonable demand visibility and benign RM environment.
The company has a high level of physical assets or inventory and debt is covered by short term assets (assets are 61.332920x debt).
ROCE: 20.01 % ROE: 13.55 % Free cash flow 5years: 1,071 Cr. Free cash flow 5years: 1,177 Cr. Debt to equity: 0.00 Interest Coverage: 171.25
All 5 stocks are fundamentally strong and can be even held for longer-term.
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