MAHA-RETURN From Maharatna Stocks This Year. PFC, REC, BHEL Deliver Over 100% Return On Investment

The 'Maharatna' status is the highest honour for Central Public Sector Enterprises (CPSEs). Achieving the eligibility itself is preeminent even for corporations having the highest market share in their respective sectors. To gain the golden status of 'Maharatna' a company needs to ensure that in the last three years, the annual average net worth has exceeded Rs. 15,000 crores or has maintained an average yearly turnover of Rs. 25,000 crores. It becomes prerequisite for corporations to post earnings of more than Rs. 5,000 crores net profit in the previous three consecutive years.

According to Manish Chowdhary, Research Head of StoxBox, "The Maharatna stocks had a very good run in 2023, with some stocks such as PFC and REC delivering close to 4x returns. Other stocks such as BHEL, ONGC and NTPC have also delivered handsome returns of between 80-130% in 2023. Considering the overall positive outlook for markets and the increasing confidence of investors about the companies' execution capabilities, we remain optimistic about Maharatna stocks for 2024. From a valuation perspective, we sense that there is still relative comfort in most of these names and will not be surprised to see traction in oil-related stocks in 2024. Considering 2024 is a general election year, the key risk which needs to be monitored is any government intervention which could hurt the buoyant sentiment in these stocks."

REC Ltd Share Gains Above 285%

Under the administrative control of the Ministry of Power, REC is an RBI-registered NBFC, Infrastructure Finance Company and Public Financial Institution. Around 90% of the loans are supplied to state sectors and it has been associated as the nodal agency for Pradhan Mantri Sahaj Bijli Har Ghar Yojana, Deen Dayal Upadhyay Gram Jyoti Yojana and National Electricity Fund. Such schemes are augmenting the electrification across the country and suggest exponential growth next year as well, having ultimate benefits for the investing company REC Ltd.

The share prices of REC Ltd. have surged highest among the Maharatna Stocks this year ensuring around 286.6% returns within a year. The 52-week high prices keep on breaching previous resistance in December month at 454.75/- and a 52-week low of Rs. 108.75 was recorded on 23rd December 2022. REC Ltd. has grown EPS by 27% per year, compounded, in the last three years, and the EBIDTA was stable, with revenue earnings growing by 15%. As per the official declarations made, REC Ltd. bestowed dividends thrice in 2023, totalling up to Rs. 10.85 per share. Retail investors can expect similar dividends, even if the share prices fail to surge as per current yearly performance.

PFC Climbs About 268%

Power Finance Corporation (PFC) is one of the largest government-run NBFCs with a market cap of Rs. 1.29 trillion, engaged in financing and development activities within the Indian Power Sector. Some of the significant services by the company include project term loans, lease financing, direct discounting of bills, short-term loans and consultancy services. In July 2023, venturing into green and renewable energy space, the Maharatna giant signed an MOU with 20 public and private corporations worth Rs. 2.37 lakh crores (US $ 29 billion).

According to the surge in prices, the shareholders of PFC were able to gain almost 270% returns in 2023. The prices in December stay at all-time high levels, with the 52-week lowest price recorded on 23rd December 2022 at Rs. 104.4/- and Rs. 428.75/- as a 52-week high on 14th December 2023. As per recent news reports, PFC Ltd. bonds have gained immense positive responses from investors amidst the exponential growth delivered so far, which forecasts a positive outlook for long-term retail investments. In dividend payout comparison, PFC provided similar dividend returns as the previous year of around 125% or Rs. 12.5 per share total for the current fiscal.

BHEL Share Price Surges 115%

Bharat Heavy Electricals Limited (BHEL) is a PSU holding that deals with engineering, testing, designing, constructing, servicing and maintaining a varied range of machinery products required in sectors like power, transmission, oil, gas, defence, aerospace, renewable energy as well as water. One of the major projects by the company this year was a contract with the Ministry of Defence (MoD), in which they successfully delivered 16 upgraded SRGMs, a weaponry defence system with better accuracy and rate of fire. There is a slight indication for investors to ride the growth here as BHEL might be able to gain similar contracts for the years ahead and improve its services.

In its research report, Sharekhan recommends a 'Buy' review on BHEL commenting, "We maintain a Buy on NTPC with a revised PT of Rs. 300 on strong earnings growth visibility, reasonable valuations and healthy dividend yield of ~3-4%." On 15th December 2022, the price of each share of Bhel stood at Rs. 83.95/- and has grown about Rs. 100/- per share by the year-end of 2023, returning a per-share profit of 116.20% in 12 months, out of which 114% was in last six months. The 52-week high point was recorded recently at Rs. 184.40/- on 14th December 2023, and the 52-week low point touched Rs. 66.30 in the last week of February this year. When the per-share investments almost double, BHEL can sustain the stains of lower dividend yields than other Maharatna companies, with a final dividend payout for this year given on Aug 2023 of 20% or 0.4 per share.

NTPC Delivers Almost 72% Returns

National Thermal Power Corporation (NTPC) is the sixth largest power producer in the world, with an installed capacity of 73,024 MW and 18 GW under construction capacity. It stands firmly as the largest power producer in India and has about 17,400 under construction and 39500 under feasibility capacity. NTPC revenue in FY23 was Rs. 1.63 lakh crores, expected to be Rs. 1.74 lakh crores by FY24, with a year-on-year growth of 11% in 2023, and 14.1% in 2024 as per ICICI securities. India's power demand is expected to be strong and has risen 7% year-on-year. NTPC plans to expand fiercely to 20GW in 2026 and expects the green energy transition to reach 46% in 2032 from 4.5% this year. EBIDTA in 2023 is 43.2 thousand crores and expected to be 44.17 thousand crores, regulated equity base to grow 10% CAGR, ROE remains at 12.2% for FY23 and expected to reach 13% by 2024.

ICICI Prudential Asset Management is the top institutional investor holding about 5.1% in NTPC and recommends a BUY call for the company ahead. On 15th December 2022, the share price floated around Rs. 174/- and this year after posting a 4.6% higher total income in the September quarter, and a PAT of Rs. 4,323.27 crore, the share prices have surged to Rs. 295.95/- or almost 70% higher in 365 days. The 52-week low was recorded on 22nd December 2022 at Rs. 165.90/- and stands firmly around the 52-week high of Rs. 298.5/- now. Dividend investors can consider adding this public enterprise to their list for next year since the dividend paid for 2023 is 95% or Rs. 9.5/- per share, which is still higher than the previous financial year.

IOC Climbs More Than 53%

Indian Oil Corporation (IOC) has been a part of government earnings since its inception in 1959 and currently holds a substantial number of retail outlets, 36,527 in total. It has the highest customer interface in India, with the largest installed refining capacity of ~70 MMT. The company has around 52% of marketing sales in petrol and diesel combined with more than 32,000 retail outlets.

The Oil demand in India reached its peak in February 2023, and investors can expect it to breach new heights next year as well since it has been fifteen years of consecutive growth so far. ICICI Direct recommends a 'Hold' option for IOC as it quotes, "IOC's core GRM improved sharply in Q1FY23. We expect it to stabilise at lower levels taking into account recent product spreads trend. The company has not passed on higher crude oil costs to customers and weaker marketing profitability is likely to impact earnings in the near term."

The share prices recorded on 15th December 2022 of IOC were Rs. 78.10/- and on 14th December 2023, it has surged more than 53% currently standing firmly at Rs. 120.10/- per share. The 52-week low of Rs. 72.35/- was posted on 23rd December and at present it grinds around the 52-week high price of Rs. 122.50, recorded on 7th December 2023. The dividend allocated by IOC Ltd. management this year is collectively 80% or Rs. 8/- per share.

HPCL Soars Above 52%

Hindustan Petroleum Corporation Limited (HPCL) is one of the largest oil and natural gas companies, having the second largest retail outlets of around 21,000 in India. The upcoming year seems promising for oil corporations as Indian refineries are all set to add up a domestic capacity of 253.9 million metric tonnes, which is achieved far earlier than the target of 310 MMT by 2028. The government support of pushing 100% FDI in upstream and private refining projects also enhances the positivity for better growth next year.

As per HDFC securities research report a 'BUY' recommendation for HPCL is published stating, "HDFC securities maintain a 'Buy' rating for Oil India as it is premised on oil and gas production growth at 3% CAGR over FY24- 26E. Attractive valuations of 4.8x Mar-25 EPS, a 20% discount to long-term average P/E of 6x, 0.6x Mar-25 P/Bv with RoE of ~15% and a dividend yield of ~8%. However, this is offset by limited earnings potential, owing to the levy of a windfall tax on crude oil prices and a decline in the price of domestically produced APM gas. Deutsche Bank also maintains a 'Buy' rating for Oil India with a target price of 460/- each share.

The demand for HPCL shares have grown strong despite financials not considered robust by investors, but the 1/4th of the market share in the retail fuel sector of India is a glittering factor that could even make seasoned investors raise eyebrows. On 15th December 2022, HPCL share prices were floating around Rs. 246.55/- and the current prices have surged to Rs. 376.7/-, more than 52% returns for investors holding the share for a transitory period of 12 months. However, this company might not make it into the list of dividend stock investors as HPCL is yet to pay out dividends for 2023 amidst comparably weaker financial performance.