Companies are said to be having a ‘fundamentally strong’ nature when they exhibit few characteristics such as favourable debt-to-equity ratio, strong and consistent financials, etc.
Listed below is one such fundamentally strong stock that has a potential upside of 28 percent:
Bharat Electronics Limited
The shares of Bharat Electronics Limited, a Navratna company, closed on Friday at Rs 124.95, slipping around 0.80 percent as compared to the previous closing levels of Rs 126 apiece. The company has a market capitalization of Rs 91,335 crores.
Having a glance at the consolidated financials of the company, the basic indicators such as the operating revenues as well as after-tax profits have consistently been rising with the most recent movement in the former being from Rs 15,368 crores during FY21-22 to Rs 17,734 crores in FY22-23, and, the latter moving from Rs 2,354 crores to Rs 2,940 crores.
The profitability metrics have seen a jump with the return on equity (RoE) increasing from 19.52 percent during FY21-22 to 21.53 percent in FY22-23, and, the return on capital employed (RoCE) taking a shift from 22.13 percent to 26.38 percent. Moreover, the company showcases healthy dividend yield numbers which were reported at 1.44 percent.
Having a positive outlook, ICICI Direct gave a buy recommendation for the stock with a target price of Rs 160 indicating an upside of 28 percent compared to the current prices prevailing in the market.
The rationale behind providing such a recommendation is pertaining to the healthy order book, huge demand forecasts for indigenized Defence Electronics, etc.
According to the data available for the June 2023 quarter, the Promoters hold a 51.14 percent stake, and the Foreign Institutional Investors (FIIs) hold a 17.35 percent stake in the company.
Bharat Electronics Limited is a company engaged in the ‘aerospace and defence’ industry manufacturing a wide range of electronics for civilian as well as defense use.
Since May 2023, the company has received orders worth more than Rs 8,000 crores. Some of the orders received by the public sector company include the supply of Long Range Guidance Kits, etc.
Written by Amit Madnani
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