There are a host of stocks that are near 52-week lows. Some of these are good blue chip companies, which have fallen despite strong potential for growth. Here are a few of these stocks that could be bought from a long term perspective.
Amara Raja Batteries
Amara Raja Batteries is India's second largest lead-acid battery manufacturer. In the last few years, the company has significantly gained market share from the replacement market as well as OEMs.
The stock has fallen from levels of Rs 1,030 to Rs 693. The one reason for the fall was the slightly subdued performance for the quarter ending June 30, 2017. This was largely on the back of margin erosion on increase in lead prices.
However, there are reasons to be optimistic on the growth and revenue front in the coming quarters.
Why Amara Raja Batteries will do better?
Auto numbers are surging, due to an aspirational middle class. This would augur well for the demand for automotive batteries from Amara Raja. Automotive batteries at the company continue to grow at a robust pace in double digits. Demand here is likely to be good.
India is looking at the possibility of selling only electric cars by 2030. Amara Raja plans to enter into electric battery for cars, which should be a big boost.
The company is also expanding its battery capacity in the 2w category, which should augur well. The addition would be to the tune of 2.25 million batteries. The ability to enter into home batteries, electric car batteries, solar and capacity expansion at the company should be other positives that one should look forward to.
Check stock quote of Amara Raja Batteries here
Valuations not very steep
The valuation of Amara Raja Batteries at Rs 693 is not very expensive. In fact, we believe with all the expansions lined-up by the company, it can generate an EPS of Rs 38 in the next two years by 2018-19.
This means, if you value the stock at premium p/e valuations of 25, you should get a price of 950 at the very least.
The company currently has a very favorable debt to equity ratio of just 0.2 times. The promoter holding in the company is also very strong at 52.1 per cent. The company also has a very small equity capital of Rs 17 crores. This is one of the best low priced stocks for good returns.
Hindustan Media Ventures
Hindustan Media Ventures, publishes the "Hindustan", which is the third largest circulated Hindi daily in the country. It is the largest circulated in Hindi daily in Bihar and has a dominant share in places Jharkhand and UP as well. The stock has recently hit a new 52-week low of Rs 246.75.
The quarterly numbers of the company for the quarter ending June 30, 2017 were not too encouraging, largely on the back of advertising spends reducing due to the GST.
However, going ahead we believe that margins and revenues would improve. The company has been one of the fastest growing Hindi language dailies in the country.
Good on fundamentals
The company has a great deal of cash on its books and has the ability to expand rapidly as compared to peers in the business.
This should augur well for the company in the years to come. With digital also gaining traction on account of low charges on data, the company should benefit from the same in the coming years.
With the central government elections in 2019, the stock should gain tremendous traction in the next 18 months, given the boost to advertisement revenues. However, the one drawback has always been the poor dividend of just 12 per cent that the company declares.
Cheap on the valuations front
Hindustan Media Ventures is one of the cheapest available media stocks. Based on an EPS of Rs 28, the stock is barely trading at a p/e of 8 times. The promoter holdings in the company is very high at 74 per cent. The return on equity was as high as 19 per cent in 2017. We believe that the stock is under priced at the current levels and closer to elections, the returns should be far higher than the current levels.
Hold the stock with a 2-year perspective for decent returns. A good low prices stocks for high returns.
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