Domestic Benchmark Indices were trading in a volatile session on Thursday. The thirty-share BSE Sensex was trading 0.46% higher at 57823.30 points and the fifty-share NSE Nifty 50 was trading at 17,044.80 points, up 0.43% at 02:40 PM on Thursday. In an otherwise volatile market, here are two fundamentally strong stocks with an upside of up to 26%:
GNA Axles Ltd
The auto components manufacturer’s shares were trading at ₹ 864 levels on Thursday.. Sharekhan by BNP Paribas has a buy call on GNA Axles with a target price of ₹ 1121. This translates to an upside of 29.75% as compared to its current share price.
The brokerage said that with a stable outlook, GNA’s management is targeting revenue of ₹ 1,550 crore-1600 crore for FY2023, which is in line with its estimates. Further, the management is targeting 7-8% revenue growth and aims to sustain an EBITDA margin of 14.5-15.0% for FY2024, which in the brokerage’s view is realistic and likely to be achievable.
The company reported a consolidated total income of ₹ 404.66 crore in the October to December quarter of 2022, up 34.32% from ₹ 301.27 crore reported in the corresponding quarter last year.
GNA Axles is a small cap company with a market capitalization of ₹ 1,913 crores. It has a return on equity of ideal 15.95% and an ideal debt to equity ratio of 0.32. Its shares were trading at a price to earnings ratio (P/E) of 16.74, which is lower than the industry P/E of 38.70, indicating that the stock might be undervalued as compared to its peers.
Varun Beverages Ltd.
The company has manufactured beverages for PepsiCo since the 1990s. Its shares were trading at ₹ 1301 levels on Thursday and it has delivered multibagger returns of 107% in the past year.
Varun Beverages is a large cap company with a market capitalization of ₹ 87,408 crores. It has an excellent return on equity of 32.62% and an ideal debt to equity ratio of 0.76. Its shares were trading at a price to earnings ratio (P/E) of 58.37, which is higher than the industry P/E of 35.70, indicating that the stock might be overvalued as compared to its peers.
Brokerage firm Motilal Oswal Financial Services has a buy rating on the stock with a price target of ₹ 1,620. This translates to an upside of 24.52% as compared to its share price of ₹ 1,301 on Thursday.
The brokerage highlighted the company’s efforts to grow sustainably in a high-potential business segment through its strong manufacturing and distribution capabilities, which give it an edge. It said that the company’s customer base is expanding rapidly in semi-urban and
rural areas. Further, the company is s increasing capacities by 20%, which are likely to be operational before the summer.
Written by Simran Bafna
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