Stocks To Buy: Tata Group Stock Trading At A Low P/E of Just 5, With Good Potential

The Sensex this week has seen a sharp fall from levels of nearly 61,300 to the current levels of 59,500 points, a drop of 1800 points. This has opened-up opportunities to buy into select stocks that have the potential for good gains. Here is a Tata group stock that has the potential to gain and is undervalued.

Tata Steel Long Products

Tata Steel Long Products has steel manufacturing facility located in Gamharia, Jharkhand which comprises a pellet plant, sinter plant, oxygen plant, lime kiln plant, coke oven, sponge iron plant consisting of five kilns, two blast furnaces and a steel melting shop. The company also has two coal based captive power plants.

The company reported a good set of quarterly numbers for the quarter ending Dec 31, 2021. Tata Steel Long Products reported revenues of Rs 1677 crores and a net profit of Rs 103.8 crores for the third quarter. For the nine month period ending Dec 31, 2021 the company reported a net profit of Rs 570 crores, taking the nine month EPS to as solid Rs 126. 44

Valuations and view on the stock of Tata Steel Long Products

The company can easily report an EPS of Rs 150 for FY 2021-22, going by the 9-month EPS of Rs 126.44. The stock of Tata Steel Long is currently trading at Rs 744, which barely translates into a p/e of 5 times. We believe that the stock is undervalued at these levels, as the price to book is also around 1.3 times. The stock is a good buy as we believe economic growth will continue to propel earnings going forward. The company also has a good track record of paying dividends and is trading at just 1.3 times price to book value.

Invest for the long-term

The Union Budget 2022-23 is likely to give a boost to infrastructure spends and we believe it will help a company like Tata Steel Long Products. The price to earnings, price to book and the dividend yield are all pretty decent.

Disclaimer

Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and his family do not hold any shares in Tata Steel Long as on the date of this article.