Markets have been inching-up and investors are increasingly looking at opportunities that are difficult to find due to elevated valuations. This almost always happens in a rising market. However, we have found a few stocks that still offer great value to investors buying into them.
Coal India shares have fallen to an almost 52-week low of Rs 243. This is because the stock has gone ex -dividend only recently, but the stock does not deserve these valuations and is a great long term stock idea.
The one and only one reason to buy Coal India is the dividend yield and the fact that the stock has plunged to a new 52-week low. In 2017, the company declared two dividends: The first was 18.75 per share and the second was Rs 1.15 per share, taking the dividend to nearly Rs 20 per share. In 2016, the company declared a dividend of Rs 26.4 per share. Now, let us assume in 2018, the company declares a dividend of just about Rs 18 per share, because the demand for coal has been falling. Even then, if you buy the share at Rs 243, your yield would be more than 7.3 per cent. This is tax free and we are assuming a worse than before dividend.
We believe that Coal India would hike coal prices at least twice this year, to reduce the burden of worker costs. We believe this could lead to enhanced earnings in the years to come. Rapid expansions and elevated Coal prices are other positives for the stock. Coal India is currently available at a p/e of just 9 times, one year forward earnings. This is relatively cheap compared to many global players. It is also a zero debt, cash rich company, which is another big positive. Check stock quote here
Power Finance Corporation
Power Finance Corporation is one of the top power finance companies in the country and one of the largest NBFC players. Today, it finances some of the largest power projects in the country. In the last year we have seen loan assets, total income and net profits of the company having surged. The government's focus on "power for all" by 2019, will result in the company doing well in the years to come. We believe this is one stock that is available at very cheap valuations which makes it a compelling buy.
This is probably one of the cheapest stocks to buy in terms of fundamentals. For the year ending March 31, 2017, the company reported an EPS of Rs 8.05. Even if the company reports an EPS of Rs 10 for 2017-18, the stock is available at a valuation of just about 10 times one year forward earnings. It is also important to remember that the company had a very bad quarter for the quarter ending March 31, 2017, which pulled down the results for FY 2016-17. This was largely due to higher provisions provisions for bad loans of over Rs5,000 crores. One can at the moment not anticipate such high provisions going forward.
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