First the warning: Indian markets are not exactly cheap and have been rallying for the last few weeks. If sentiments take a turn for the worse there is no telling how stocks can fall, no matter how strong they are. However, we have picked a few stocks that are capable of weathering the storm and could be good value picks over the long term.
H.G. Infra Engineering
H.G. Infra Engineering is a stock that could benefit from robust infrastructure development.
The company is an excellent play on highways, water projects, bridges, roads etc. It caters to some very large contractors like L&T, IRB Infra, Tata Projects etc.
What is most interesting about the company is that its solid execution capabilities has enabled it emerge as an independent bidding player in very large road projects.
H.G. Infra Engineering is also likely to see its debt reduce significantly, with a debt to equity ratio of just 0.2 times by FY 2019, thanks to proceeds from the IPO.
The company's shares are trading at just Rs 237, compared to the IPO price of Rs 270. Over the last few years (2013-2017) the company has grown at a compounded rate of 37 per cent. There is reason to believe that it would grow rapidly, give its strong execution capabilities and the order flows from the NHAI.
The stock is trading at just 12.5 times its estimated EPS of Rs 19 for 2018-19. The promoters hold a very high stake of slightly more than 73 per cent in the company.
Th stock remain undervalued at the current levels and is a good pick.
Hindustan Petroleum Corporation is a stock that can be bought, as the shares have now crashed to a new 52-week low of Rs 251.
The one risk that HPCL shares face is that of rising crude prices. However, at the moment prices are linked to market rates and it is unlikely that the government would ask the oil marketing companies to absorb the hike in crude rates.
HPCL has been a stock that has outperformed the indices in the last few years. In fact, the net profits of the company have nearly grown seven fold from Rs 1,100 crores in FY 2014 to Rs 7,124 crores in 2018.
The company has the largest pipeline in the country and also has the largest lube manufacturing facility.
HPCL: Relying on expension
HPCL is relying on some solid expansion plans to propel growth. The company has a planned outlay of Rs 75,000 crores for the next few years, which would include capacity addition at Mumbai and Vishakapatnam, expansion of gas pipeline network and a 5 mmtpa liquified natural gas regasification terminal coming up at the Chhara port in Gujarat.
The company reported an EPS of Rs 47.2 for FY 2017-18. This means the stock is trading at a p/e of just 5 times, the trailing EPS.
Shalby Ltd is a renowned hospital chain, that are considered as leaders in "knee replacement" surgery.
The company is almost a debt free company, with return on investments that are probably the best for a listed hospital chain.
The reason to buy the stock of Shalby are plenty. The promoters of the company own more than 79 per cent shares in the company. It also reported a decent net profit of Rs 12.1 crores for the quarter ending June 30, 2018, despite slightly higher expenses on advertising and start-up operations in select new hospitals.
Going ahead with the commissioning of new hospitals the profits are expected to improve a great deal.
Shalby: Cheap on valuations
Shalby is one of the cheap low priced hospital stocks that individuals should buy. The company can report an EPS of Rs 8 for 2019-20. This means the stock is trading at just 20 times this earnings.
Hospital stocks are known to receive very high discounting of 30 to 40 times. There is no reason the shares should trade at such low valuations given the decent profitability and margins in the past.
One can buy the Shalby stock with a long term perspective in mind. Also, in case there is a sudden crash in the markets, healthcare stocks tend to protect capital as they are largely considered as defensive plays.
This article is strictly for informational purposes only. It is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author of this article do not accept culpability for losses and/or damages arising based on information in this article. The author owns Shalby Ltd shares.
Taxation on stocks
It is important to remember that with effect from April 1, 2018, there would be a long-term capital gains tax that would be levied on stocks. Therefore, investors may not that there would be a 10 per cent tax that is applicable.