First the warning: Indian markets are not exactly cheap and have been falling 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.
P C Jeweller
This stock has fallen from levels of Rs 500 to the current levels of Rs 150. There were some worries over corporate governance. Initially, there were reports linking the company to Vakrangee, which had been investigated by SEBI for price manipulation.
The company denied any involvement with Vakrangee and the latter itself was given a clean chit by SEBI. Then came some info of a promoter having transferred some shares to a relative, which was true.
Probably, this should have been notified, though it was unlikely to result in any significant fundamental changes to the company.
In any case, the shares plummeted from levels of Rs 500 to Rs 150, which makes it attractive at the current levels.
PC Jeweller: Good expansion plans
The company made a presentation recently, it which it showed the new showrooms opened recently.
Expansion plans at PC Jeweller is clearly on track. The company also announced a buyback of shares at Rs 350, as against the current market price of Rs 150.
Closer to the buyback date, we should see some momentum in the stock. The shares are a good bet, given that the buyback price is way higher than the current market price.
Fundamentally too, the stock is trading at a p/e of just 9 time one year forward earnings. This is a good stock to buy at the current price of Rs 150.
Polyplex Corporation Ltd (PCL) is one of the world's largest manufacturers of thin Polyethylene Terephthalate (PET) film.
This finds application in Packaging, Industrial, Electrical & Imaging industry. The company has plants and distribution facilities in India, Thailand, Turkey and the US. Polyplex has a capacity of 186,000 metric tonnes of thin PET film and 28,800 metric tonnes of thick PET film which comprises large part of its capacity.
The company has also over the years integrated backwards for the manufacture of PET Resin, which is key raw material for production of PET films. This augurs well for the company which is able to save on costs.
Polyplex: Strong on fundamentals
Polyplex is strong on fundamentals and has been paying very good dividends. In fact, the company has paid a dividend of 90% in 2017 and 60% in 2016. The dividend for 2018 is a superb Rs 35 per share. The company's shares are also currently trade below the book value.
Apart from this the end consumer industry are also growing at a frantic pace which augurs well for the company. The company can report an EPS of Rs 70 for 2018-19. The stock is thus available at p/e of just 6 times. For some reason the stock has not received good discounting and most certainly deserves better valuation. It will not be a surprise to see the stock re-rated once again.
This company could be one of the key beneficiaries of India's digital drive. Sterlite Technologies (STL) has a solid 40 per cent market share in the domestic optical fibre market. It is riding on the demand of OF/OFC from global telcos as they plan to build 5G networks.
The company is looking to expand its optical fibre capacity by almost 50 per cent in the next 18 months. Sterlite Technologies plans to achieve the capacity utilization of 90 per cent by 2019. This could see a sharp jump in revenues in the coming years.
Sterlite Technologies: A good buy
Sterlite Technologies also has a good solid presence in the software services business, where it has a strong order position.
We believe that by 2019-2020, the company can achieve an EPS of Rs 14 at the very least. If we apply a p/e of 40 times the stock should trade at Rs 560 at the very least in the company few years.
Expansion, strong order book and a focused management team, make the stock of Sterlite Technologies a good bet at the current levels.
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.
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.