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2 MNC Stocks With Renowned Brands Near 52-Week Lows, Should You Buy?
The Sensex has shed more than 1300 points in the last two trading sessions. Despite this, the Indian stock markets still look expensive when compared to long-term averages. However, there are a few stocks that have fallen to near 52-week lows. Here are a few stocks and we tell you whether to buy the same at the current levels.
Hindustan Unilever
| 52-week low | 52-week high | Current market price |
|---|---|---|
| Rs 2120 | 2859 | Rs 2309 |
Hindustan Unilever is the No 1 player in the FMCG space in India, which makes Surf to Pepsodent to Lux and so on. In fact, according to unconfirmed reports, 9 out of 10 households in India use one or more HUL brand.
The shares of India's largest FMCG player, Hindustan Unilever has fallen sharply from 52-week highs. This is typical of FMCG companies, where investors largely remain worried over sharp increase in costs, which are impacting margins.
In fact, input costs have gone high for FMCG companies, which should squeeze margins for many of these players. In terms of price to earnings multiples, HUL still quotes at very high p/e. We do not believe that in the next few quarters, there would be a significant jump in earnings and hence share price.
For the first six months ending Sept 30, 2021, the company reported an EPS of Rs 18. If we annualize the same, as an indication then, the EPS of Rs 36 is possible for the full year ending March 31, 2022. This means the stock on a price of Rs 2309 is trading at a p/e of 64 times, which is very expensive.
It is unlikely that FMCG companies would churn out stupendous growth as in the past to warrant such a high price. Buy the stock of Hindustan Unilver, if you get the same near the Rs 1800 mark.
Castrol India
| 52-week low | 52-week high | Current market price |
|---|---|---|
| Rs 117 | 154 | Rs 124.90 |
This Castrol India stock unlike HUL, could be a very interesting stock to buy. The company is one of the leaders in industrial and automotive lubricants space. The shares are available at a dividend yield of 4.41%, which you seldom get for MNC stocks.
Castrol India follows a calendar year for financial results. In the first nine months ending Sept 30, 2021, the company has reported an EPS of Rs 5.76. This means an EPS of Rs 8 is possible for the full year. Typically, on a very conservative estimates, given its strong brand and MNC status, even if you apply a p/e of 20 times, the stock should trade at 160 at the very least, as against the current market price of Rs 124. We believe on the basis of valuation, strong dividend yields and strong brand equity the stock is under valued and is a good buy at these levels.
Disclaimer
Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and is family do not hold shares in any of the above mentioned companies.
