Finance Minister, Nirmala Sitharaman will deliver the Union Budget 2022-23 on Feb 1. Markets are trading almost at peak levels, with investors betting for further reforms in the Union Budget. Here are a couple of stocks that could benefit from the Union Budget.
Kalpataru Power Transmission: A big player in power EPC
This is a company that is engaged in engineering, procurement, and construction (EPC) services relating to power transmission and distribution. Apart from this the company also has a strong presence in civil construction, railway track laying and electrification, and oil and gas pipelines laying in India and abroad. The Government is likely to boost infrastructure spends and this is where companies like Kalpataru Power Transmission could benefit. In fact, in the last few quarters the company has done pretty well with revenues and profitability growing.
Kalpataru Power Transmission: Buy the stock as valuations remain attractive
For the quarter ending Sept 30, 2021, Kalpataru Power reported total income of Rs 3549 crores with the net profits coming in at Rs 80 crores. The company has a small equity of Rs 30 crores, which resulted in a strong EPS of Rs 5.57. Now, in a quarter where there are no lockdowns or curfew, we could see the company performing much better in the coming quarters.
In fact, for 2022-23, we believe that the company is likely to do much better, with an EPS of Rs 30 at the very least. If you apply a p/e of 20, the stock should trade near Rs 600, as against the current market price of Rs 411. Buy the stock of Kalpataru Power for long-term.
Deepak Fertilisers and Petrochemicals
Deepak Fertilisers And Petrochemicals Corporation Limited produces and sells fertilizers and industrial chemicals in India. This is another stock that could benefit from the Union Budget as the Government looks to boost agriculture income. The company had a very good quarter for the period ending Sept 30, 2021, despite increase in raw materials costs the company managed to grow profitability.
Typically, 2nd Quarter is a seasonally low period for mining chemicals due to monsoon also Q2 FY22 witnessed gradual resumption of economic activities. AN Melt recorded highest-ever 2nd Quarter sales volume with a 74% y-o-y growth. HDAN sales volume grew by 51% as supported by combination of fixed-price short-term agreements and increasing prices of imported AN due to availability concerns from exporting Countries.
Deepak Fertilisers and Petrochemicals: Valuation and view
Deepak Fertilisers is expanding and new ammonia plant and TAN plant is expected to commission in Q4 FY23 and Q4 FY24. This is likely to boost earnings of the company in the coming quarters. Despite the sharp increase in key raw material prices y-o-y, the company has and will strategically direct efforts right from Crop Specific product to farmer-focused marketing drive should benefit in expanding its market share and margins. The company has also reduced its debt in the Sept quarter, which is now down substantially.
As expansion at the company fructifies the company could see a boost to earnings. Buy the stock of Deepak Fertilisers for a holding time frame of 3 to 5 years.
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 the above mentioned companies.