Financially strong stocks are generally referred to as stocks of companies showcasing consistent levels of revenues and profits, low leverage ratios, and many more.
Listed below is one such financially strong company that one could add to their watchlist for a potential upside of up to 55 percent:
Ashoka Buildcon Limited
With a market capitalization of Rs 4,608.07 crores, the stocks of Ashoka Buildcon Limited are currently trading at Rs 164.15, gaining approximately 2.50 percent as compared to the previous closing levels of Rs 160.45 apiece.
Digging into the financials of the company, the basic business indicators, viz, operating revenues as well as after-tax profits, rose during the recent quarters.
The former increased from Rs 2,154 crores during Q2FY23-24 to Rs 2,657 crores during Q3FY23-24, and the latter, keeping the timeframe the same, rose marginally from Rs 118 crores to Rs 119 crores.
In addition, the company’s return ratios such as return on equity (RoE) and the return on capital employed (RoCE) were reported at decent numbers with the former reported at 21.16 percent and the latter at 51.79 percent.
Having a positive outlook for the company, HDFC Securities gave a ‘Buy’ call on the company’s stock with a target price of Rs 254 per share indicating a potential upside of approximately 55 percent compared to the prevailing stock price level.
The rationale behind providing such a recommendation pertains to a well-diversified order book, coping up to its FY24 revenue growth guidance of 15% YoY, comfort balance sheet position, stable debt levels, improving visibility on asset monetization, and likely cash inflows from the same.
As per the recent presentations, the company’s total backlog of order book stands at more than Rs 14,000 crores with 42 percent attributable to the Power Transmission projects, 34 percent to Road (EPC) projects, 9 percent to Road (HAM) projects, around 9 percent to Building (EPC), and the remaining towards the Railways segment.
The latest shareholding pattern data represents the company’s Promoters holding a 54.48 percent stake and the Foreign Institutional Investors, recently increasing their stake, currently hold a 4.51 percent stake in the company.
Ashoka Buildcon Limited is engaged in the business of developing highways and is also active in the power transmission and distribution business. The company operates via three broad segments, i.e., construction and contract-related activities, build operate & transfer (BOT) projects, and sale of goods.
Written by Amit Madnani
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