There’s been no shortage of dinner table stories where people profoundly talk about how they made a massive profit. Stocks rising by 20%, 30% or even 50% in a matter of days has been common.
Amid the bullishness in the market, there are some stocks that are nearing their 52-week high, yet look undervalued by their valuation ratios.
Let’s take a look at five such stocks.
#1 Maharashtra Seamless
First on this list is Maharashtra Seamless.
It’s the flagship company of the well-diversified DP Jindal Group.
The company is engaged in the manufacturing of seamless and ERW steel pipes & tubes. It has diversified the business portfolio in renewable power generation too.
Shares of the company currently trade at ₹447, a tad lower from its 52-week high price of ₹462 touched on 29 May 2023.
On the valuations front, the company trades at a price to earnings (PE) multiple of 7.8x, compared to its 5-year median PE of 8.4x. The 10-year median PE comes to 11.1x, which gives enough comfort on the earnings front at the current price.
Its price to book value ratio comes to 1.2x, a slight premium to its 5-year median P/BV of 1x.
Historical Valuations of Maharashtra Seamless
| FY18 | FY19 | FY20 | FY21 | FY22 | |
| Adjusted PE (x) |
13.5 |
14.2 |
15.5 |
18.8 |
9.7 |
| Price to Book Value (x) |
1.0 |
1.1 |
0.4 |
0.6 |
1.0 |
| Dividend Yield (%) |
1.4 |
1.2 |
1.3 |
1.3 |
0.9 |
| Marketcap to Sales |
1.3 |
1.1 |
0.5 |
0.8 |
0.9 |
Data Source: Ace Equity
Maharashtra Seamless has a 55% market share in the segment of seamless pipes with manufacturing facilities at Nagothane & Mangaon in Maharashtra and Narketpally in Telangana.
The outlook of the seamless segment is bright. The global seamless pipes market is expected to witness strong growth in demand for OCTG pipes, driven by a resurgence in exploration & production activity in the oil & gas sector and greater emphasis on horizontal and directional drilling operations.
Another key driver for the seamless pipes market growth is the growing demand from the sugar and chemical industries where the usage of boilers and other chemical processes is frequent.
Various initiatives taken by the government of India to boost the oil and gas sector are a blessing in disguise for the company.
Demand from Oil and Gas Industry a key driver for Maharashtra Seamless
| End User Industry | Contribution to Revenues | Top Clients |
|---|---|---|
| Oil & Gas | 70% | ONGC, Oil India, OMCs |
| Boiler Industry | 15% | Isgec, BHEL, NTPC |
| City Gas Distribution | 15% | Mahanagar Gas, IGL, Gujarat Gas |
Source: Company, Equitymaster
The government of India has also announced specific policies for pipe manufacturers. The seamless & ERW pipes sector is getting a major boost from Make in India and Aatmanirbhar Bharat policy.
The company recently won a big order from ONGC to supply seamless tubing pipes and accessories worth ₹2.6 bn.
The market has factored in all these positives well as shares of Maharashtra Seamless continue to remain upbeat.
Maharashtra Seamless Share Price – 1 Year Performance
View Full Image
#2 Banco Products
Next on this list is Banco Products.
Banco Products is engaged in the business of manufacturing and supplying engine cooling modules for automotive and industrial use in India and overseas.
It has several big names from the industry as its clients. Some of them are Ashok Leyland, Eicher, Mahindra, Godrej, and Indian Railways.
Shares of the company currently trade at ₹282, a tad lower from its 52-week high price of ₹292 touched on 18 May 2023.
On the valuations front, the company trades at a price to earnings (PE) multiple of 8.3x, compared to its 5-year median PE of 10x. The 10-year median PE comes to 10.4x, which gives enough comfort on the earnings front at the current price.
Its price to book value ratio comes to 1.9x, a slight premium to its 5-year median P/BV of 1.5x.
Historical Valuations of Banco Products
| FY18 | FY19 | FY20 | FY21 | FY22 | |
| Adjusted PE (x) |
13.0 |
15.9 |
6.1 |
8.8 |
6.4 |
| Price to Book Value (x) |
1.9 |
1.3 |
0.7 |
1.2 |
1.0 |
| Dividend Yield (%) |
4.7 |
5.2 |
30.7 |
1.4 |
14.7 |
| Marketcap to Sales |
1.1 |
0.7 |
0.3 |
0.7 |
0.5 |
Data Source: Ace Equity
The stock’s current dividend yield is 8%, which means ₹100 invested will generate a dividend of ₹8.
Its five-year average dividend yield comes to 7.96%, which is higher than the FD rates of top banks.
The company has a rich history of dividend payments and has paid dividends to its shareholders since 2004. The company has also maintained a dividend yield above 3% in the last five years.
A sustained increase in revenue and profit has helped the company to increase its dividend payout in the last five years.
While the company hasn’t really set the growth charts on fire, it has shown solid stability and a rock-solid balance sheet.
The latest shareholding pattern of Banco Products shows that FIIs have been adding stake for the past four consecutive quarters.
Going forward, the company plans to expand its business in Europe and the US through its subsidiaries.
Banco Products Share Price – 1 Year Performance
View Full Image
#3 IFGL Refractories
Third on this list is IFGL Refractories.
IFGL Refractories is a Kolkata-based Indian multinational company. It was merged with its subsidiary, IFGL Exports in 2016 which was involved in the manufacturing of continuous casting refractories.
The company manufactures specialised refractories and requisite operating systems for flow control in steel teeming and continuous casting of steel.
Shares of this leading refractories solution provider have been on a roll and they currently trade at ₹297, a tad lower from their 52-week high price of ₹311 touched on 29 May 2023.
On the valuations front, the company trades at a price to earnings (PE) multiple of 13.4x, compared to its 5-year median PE of 14.3x.
Its price to book value ratio comes to 1.06x. This is a slight discount compared to its 5-year median P/BV of 1.1x.
Historical Valuations of IFGL
| FY18 | FY19 | FY20 | FY21 | FY22 | |
| Adjusted PE (x) |
19.2 |
17.2 |
17.2 |
17.4 |
12.0 |
| Price to Book Value (x) |
1.2 |
1.1 |
0.4 |
1.3 |
1.0 |
| Dividend Yield (%) |
0.8 |
1.0 |
2.7 |
3.2 |
2.7 |
| Marketcap to Sales |
1.1 |
0.9 |
0.4 |
1.1 |
0.7 |
Data Source: Ace Equity
According to reports, the refractory market is approximately US$ 1.5 bn market in India with RHI Magnesita capturing the lion’s share.
In December 2022, the company lined up a huge capex worth ₹1.6 bn by financial year 2024 to ramp up its capacity and meet growing demand.
Among its new capacities, the greenfield capex in Vizag and some additional capacities became operational in the second half of FY23, which has helped shares of the company continue their momentum.
IFGL Refractories Share Price – 1 Year Performance
View Full Image
Data Source: Ace Equity
#4 NCC
Fourth on this list is NCC.
The company’s operations can be broadly classified into EPC (engineering, procurement, and construction) business (both domestic and international and development business), BOT (build-operate-transfer) projects in infrastructure, and real estate development.
Under EPC, NCC is into the construction of industrial and commercial buildings, roads, bridges and flyovers, water supply and environment projects, housing, irrigation, security services etc.
Shares of the company currently trade at ₹123, a tad lower from their 52-week high price of ₹127 touched on 3 May 2023.
On the valuations front, the company trades at a price to earnings (PE) multiple of 12.3x, compared to its 5-year median PE of 12.3x. The 10-year median PE comes to 15.2x, which gives enough comfort on the earnings front at the current price.
Its price to book value ratio comes to 1.2x, a slight premium to its 5-year median P/BV of 1x.
Historical Valuations of NCC
| FY18 | FY19 | FY20 | FY21 | FY22 | |
| Adjusted PE (x) |
41.9 |
11.7 |
3.4 |
18.0 |
7.4 |
| Price to Book Value (x) |
1.7 |
1.5 |
0.2 |
0.9 |
0.6 |
| Dividend Yield (%) |
0.9 |
1.3 |
1.1 |
1.0 |
3.4 |
| Marketcap to Sales |
0.8 |
0.5 |
0.1 |
0.6 |
0.3 |
Data Source: Ace Equity
In FY23, NCC registered its highest ever annual order inflow worth ₹259 bn. With this, its order book crossed ₹500 bn for the first time in its history.
Sure enough, the company also reported highest every topline in bottomline while also bringing down debt dramatically.
In the most recent quarter, the company’s topline got a boost primarily driven by the buildings division and water division.
The company reported a one-time gain of ₹1.7 bn in the fourth quarter from the sale of its stake in unit NCC Vizag Urban Infrastructure.
Going forward, a strong order book and timely execution will work in NCC’s favor.
NCC Share Price – 1 Year Performance
View Full Image
#5 Dhanuka Agritech
Last on this list is Dhanuka Agritech.
Formerly known as Dhanuka Pesticides, Dhanuka Agritech manufactures a wide range of agrochemicals. The company has established itself across major crops (rice, cotton, soybean, and vegetables) and geographies (south and west).
The company’s production facilities are located at Sanand in Gujarat, Jaipur in Rajasthan, and Udhampur in Jammu & Kashmir.
Shares of the company currently trade at ₹715, a tad lower from their 52-week high price of ₹748 touched on 5 September 2022.
On the valuations front, the company trades at a price to earnings (PE) multiple of 14.1x, compared to its 5-year median PE of 16.9x. The 10-year median PE comes to 19.8x, which gives enough comfort on the earnings front at the current price.
Its price to book value ratio comes to 3.1x, a slight discount to its 5-year median P/BV of 3.5x and 10-year median of 4.3x.
Historical Valuations of Dhanuka Agritech
| FY18 | FY19 | FY20 | FY21 | FY22 | |
| Adjusted PE (x) |
21.5 |
16.6 |
10.9 |
15.3 |
16.0 |
| Price to Book Value (x) |
4.3 |
2.9 |
2.2 |
4.0 |
3.5 |
| Dividend Yield (%) |
1.0 |
0.2 |
3.7 |
0.3 |
2.0 |
| Marketcap to Sales |
2.8 |
1.9 |
1.4 |
2.3 |
2.3 |
Data Source: Ace Equity
Over the years, what has worked for Dhanuka is the long standing tie-ups it has with global innovators, along with strong R&D. The company also has a capacity expansion plan in place for growth and backward integration.
In FY23, the company’s revenue saw a 15% growth on a YoY basis. In its latest concall, the company said the technical plant project at Dahej is progressing well and production is expected to start in the third week of July 2023. It’s looking at an even bigger capex in the current financial year.
Last month in May 2023, the company made investments in two startups to support young entrepreneurs in the agriculture sector. In 2021, Dhanuka Agritech had invested around ₹300 million in agri drone manufacturer IoTechWorld Avigation for a minority stake.
Going forward, the agrochemical company plans to aggressively roll out new formulations.
Dhanuka Agritech Share Price – 1 Year Performance
View Full Image
So there you go…five stocks that are near their 52-week high yet they seem undervalued when looked at their long term valuations.
Happy Investing.
Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
Know your inner investor
Do you have the nerves of steel or do you get insomniac over your investments? Let’s define your investment approach.
Download The Mint News App to get Daily Market Updates.
Updated: 02 Jun 2023, 10:21 AM IST