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Midcap Stock To Buy: Low P/E Of Just 5, Solid Cash Flows, Strong Balance Sheet
Digging for value in a market where the Sensex is surging is always difficult. Most stocks have doubled, tripled and even quadrupled in the last 1-2 years. Here is a good midcap stock that still remains under valued and could be a good buy at the current price.
About Jindal Poly Films
Jindal Poly Films is the largest manufacturer of BOPET and BOPP films in India. The Company's plant at Nasik, Maharashtra is the world's largest single location plant for the manufacture of BOPET and BOPP films. It is also the 8th largest BOPET Film manufacturers in the World.
Having said that the company had had a robust quarterly performance almost every quarter for the many quarters now. In fact, the business has done well, even in times of the difficult covid situation. Let us take a look at the quarterly numbers of the company here below.
Solid financial performance
At certain times, especially during covid, we have seen companies being impacted. That has not been the case for Jindal Poly Films. For the quarter ending Sept 30, 2021, the company reported Rs 253.6 crores as net profits, as against Rs 232.8 crores for the June quarter 2021. The story has remained the same for the other quarters as well.
In fact, the earnings have grown at an annualized rate of 36.5% over the last 5-years, which is rather robust by any stretch.
In fact, the debt on the books is easily covered by the cash flows and the debt to equity ratio has fallen over the years. It currently stands at 15.7%, which is extremely healthy.
Valuations suggest a “buy” on the stock of Jindal Poly Films
If you see the Earnings Per Share (EPS) of the company for the quarter ending Sept 30, 2021, it is around the Rs 57 mark. If you annualize the same, it translates to around Rs 228. The company keeps reporting an EPS around that mark as was also in the June quarter. Now, if you take the EPS of Rs 228, we would get a p/e of just 4.96, based on the current market price of Rs 1131.
This kind of p/e one seldom finds in the stock markets currently. The price to book is also around that 1.87, which is low, when compared to the broader markets.
Good for long term investors
We believe that the stock is undervalued and has some way to go, if the current pace of earnings continues. Buy the stock of Jindal Poly and hold for the long-term.
Our only worry right now, is not so much the performance of the company, but, the market as a whole. The Indian markets at the moment are overvalued and ripe for profit booking. This might have some impact on individual stocks. That is the only concern right now, but, otherwise the stock is certainly under valued.
Disclaimer
Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. Investing in equities is risky. The author and his family do not own any shares of Jindal Poly Films mentioned above.
