The Indian stock market has shown robust growth, with a 1.9% increase in the last week and an impressive 45% rise over the past 12 months, alongside expectations of a 16% annual earnings growth in the coming years. In such a thriving market, identifying stocks that may be undervalued could offer potential opportunities for investors looking for value and growth prospects.
Top 10 Undervalued Stocks Based On Cash Flows In India
Overview: Godrej Properties Limited, along with its subsidiaries, focuses on real estate construction and development in India, boasting a market capitalization of approximately ?919.33 billion.
Operations: The company generates revenue primarily from real estate construction and development, amounting to ?29.95 billion, with a smaller segment in hospitality bringing in ?0.41 billion.
Estimated Discount To Fair Value: 42.2%
Godrej Properties, trading at ?3330.65, significantly below its estimated fair value of ?5743.83, appears undervalued based on cash flows and discounted cash flow analysis. Despite challenges in covering debt with operating cash flow and the impact of large one-off items on earnings, the company's financial performance is strong with a notable increase in net income and revenue growth outpacing the market substantially at 31.7% annually. Recent results show robust year-over-year gains in sales and net income, reinforcing its growth trajectory amidst a competitive Indian real estate market.
Overview: Shyam Metalics and Energy Limited is an integrated metal company based in India, specializing in the production and sale of long steel products and ferro alloys, with a market capitalization of approximately ?200.96 billion.
Operations: The company generates ?131.95 billion primarily from the sale of long steel products and ferro alloys.
Estimated Discount To Fair Value: 28.2%
Shyam Metalics and Energy, priced at ?721.85, is perceived as undervalued when evaluated against its estimated fair value of ?1006.19 based on discounted cash flow analysis. The company's revenue growth is projected to exceed the market with a substantial annual increase of 25.5%. Despite this potential, the dividend coverage by cash flows remains a concern. The recent appointment of Mr. Chandra Shekhar Verma as an Independent Director could strategically enhance decision-making processes and foster further growth in the steel sector for Shyam Metalics.
Overview: Vedanta Limited is a diversified natural resources company operating in sectors such as minerals, and oil and gas, with operations spanning India, Europe, China, the United States, and Mexico; it has a market cap of approximately ?1.74 trillion.
Operations: The company's revenue is primarily generated from Aluminium (?483.71 billion), Zinc - India (?279.25 billion), Copper (?197.30 billion), Oil and Gas (?178.37 billion), Power (?61.53 billion), Iron Ore (?90.69 billion), and Zinc - International (?35.56 billion).
Estimated Discount To Fair Value: 36.1%
Vedanta Limited, currently trading at ?469.1, is significantly undervalued with a DCF-based fair value of ?732.79, indicating a potential undervaluation of over 20%. Despite its high debt levels, Vedanta's return on equity is forecast to be very large in the next three years at 51.1%. However, its dividend sustainability is questionable as the current yield of 4.69% isn't well covered by earnings. Earnings are expected to grow robustly by 42.8% annually over the next three years, outpacing the Indian market's growth rate. Recent activities include plans to sell a stake and raise substantial funds through block deals and NCDs to potentially reduce debt burdens and streamline operations.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
