Companies with a ‘fundamentally strong’ nature exhibit some characteristics which include favorable leverage ratios, strong financial metrics, etc.
Listed below is one such Fundamentally Strong stock to buy now for an upside of 28 percent:
Gujarat Fluorochemicals Limited:
Gujarat Fluorochemicals Limited is engaged in a diversified business of producing refrigerants, chloromethanes, caustic soda, etc in India. The company’s shares are currently today at Rs 3,130 levels, marginally down around 0.60 percent as compared to the previous close of Rs 3,148.90. It has a market capitalization of Rs 34,383 crores.
Keeping a purview of two years, the stock has delivered multibagger returns of around 175 percent. It means that if someone would have invested Rs 1 Lakh into the stock, it would have converted to Rs 2.75 Lakhs within a period of two years.
Digging into the financials of the company, the company has been able to consistently increase its operating revenues with the most recent movement being from Rs 3,953 crores during FY21-22 to Rs 5,684 crores in FY22-23. Moreover, the company’s net profits, keeping the timeframe the same, have risen from Rs 775 crores to Rs 1,323 crores representing an increase of 70 percent.
Coming onto the ratio analysis, the net profit margin has gone up from 19.62 percent during FY21-22 to 23.27 percent in FY22-23. The debt-to-equity ratio has shown a reduction from 0.36 times to 0.27 times during the time horizon mentioned above.
Moreover, the profitability metrics such as the return on equity (ROE) and return on capital employed (ROCE) went up with the former moving from 18.49 percent during FY21-22 to 24.06 percent in FY22-23 and the latter, keeping the timeframe the same, increasing from 22.60 percent to 31.52 percent.
ICICI Direct gave a ‘Buy’ recommendation on the stock with a target price of Rs 4,000 indicating an upside of 28 percent as compared to the current stock prices prevailing in the market.
The rationale behind providing such a recommendation is pertaining to the growth prospects as it forays into new age segments, vertical integration leading to improving margins and ratios, etc.
According to the shareholding data available for the March 2023 quarter, Promoters of the company hold a 63.81 percent stake, and Foreign Institutional Investors (FIIs) hold a 4.85 percent stake in the company.
Written by Amit Madnani
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