Benchmark indices have rallied significantly since March and the markets are not really cheap at these levels. One has to dig deep to find value. Here are 3 stocks that should be a part of your portfolio for returns as well as dividends. Two of these have been picked from brokerage reports.
Broking firm Sharekhan has placed a buy call on the stock of Balkrishna Industries with a price target of Rs 1,770, as against the current market price of Rs 1,459.
"Balkrishna Industries is witnessing strong recovery in demand and is expected to improve its earlier guidance of flat volume in FY2021.
Margins are expected to improve driven by captive usage of carbon black, favourable currency movement, and benefits of operating leverage. We expect topline/profit to post 13%/17% CAGR over FY2020- FY2023.
We have raised our FY2021/FY2022/FY2023 estimates by 9%/4%/4%, respectively. We rollover our valuation multiple on FY2023 earnings. At the current market price, the stock is trading at 18.8x its FY2023 earnings. However, the premium multiples are sustainable, given the strong balance sheet (debt free at net level) and robust return ratios with ROE of 17-20% and ROCE of 18-22%. We recommend Buy with price target of Rs. 1,770," the brokerage firm has stated.
Brokerage firm ICICI Direct has recommended buying the stock of Supreme Industries.
According to the brokerage firm, the valued added products contribution in topline has increased to 38% in FY20 from 36% in FY19.
"In the first five months of FY21, the contribution of value added products in topline increased by 2 percentage points despite the lockdown led disruptions in metro regions.
We believe continuous rising proportion of VAP in topline would help drive EBITDA margin, going forward. We model 130 bps expansion in EBITDA margin in FY20-23E. Valuation & Outlook Supreme Industries' sharp business recovery post easing of lockdown restrictions depicts its strong supply chain networks and deep rural penetration. We change our rating from HOLD to BUY and value the company at 35xFY22E earnings with a revised target price of Rs 1650 per share," the broking firm has stated.
The stock of Supreme Industries was last quoted at Rs 1,404.
Rural Electrification Corporation is a government owned company that is into power finance. The stock is trading at very low valuations. In fact, the price to earnings ratio is under 4 and the price to book value is under 0.58 times.
Apart from this, the stock is offering a dividend yield of more than 10 per cent. For FY 2020-21, even if the dividend is cut marginally, we do not anticipate the dividend yield to fall below 8 per cent.
This makes the stock attractive at these levels. The company tends to declare a dividend in the month of March and April every year.
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