India is a well-recognized Automobile manufacturing hub worldwide due to cheap labor, easy availability, and low cost of raw materials, which are the factors driving the manufacturing Industry. India is the world’s fourth largest producer of automobiles, with an annual production of more than 4 million vehicles.
The automotive market in India was valued at USD 100 billion in 2021 and is predicted to reach USD 160 billion in 2027, growing with a CAGR of 8.1% CAGR over the forecast period.
The P/E (Price to Earnings) ratio compares a company’s current share price to its earnings per share (EPS), which is a commonly used measure to define the value of a stock.
A Company with a lower P/E ratio is often considered as better than the market average or competitors. This indicates that investors are paying less money for every dollar of earnings generated by a firm, this method assists investors in making informed decisions before investing.
Here are two undervalued Auto Stocks
VST Tillers Tractors Ltd.
VST Tillers Tractors Ltd is a small-cap stock with a market capitalization of Rs 3,175 crores. The company’s shares were trading at Rs 3,679.30 per share, down 0.40 percent on Thursday from the previous close price.
The company’s P/E ratio is 27.69, which is lower than the industry’s P/E ratio of 30.71, indicating that the stock is trading at a lower price or is undervalued, With an EPS of 133.47.
VST Tillers Tractors achieved profitability ratios of 11.20 percent return on equity and 14.39 percent return on capital employed in the most recent fiscal year. Consequently, the company’s net profit margin is 9.17 percent and its operating margin is 12.44 percent.
The company’s revenue has increased by 5 percent year on year, from Rs 235 crore in Q1FY23 to Rs 246 crore in Q1FY24. During the same period, net profit jumped by 220 percent from Rs 10 crore to Rs 32 crore.
VST Tillers Tractors Ltd is a manufacturer of compact four-wheel drive tractors with rotary engines. The company’s product line includes tillers, tractors, and diesel engines. It is India’s largest maker of Power Tillers.
Swaraj Engines Ltd
Swaraj Engines is a small-cap stock with a market capitalization of Rs 2,613 crores. The company’s shares were trading at Rs 2,151.50 per share, down 1.80 percent on Thursday from the previous close price.
The company’s P/E ratio is 18.50, which is lower than the industry’s P/E ratio of 35.82, indicating that the stock is trading at a lower price or is undervalued, With an EPS of 111.
Swaraj Engines’ profitability ratios have improved in the recent financial year with a return on equity of 39.04 percent and a return on capital employed at 51.41 percent. Consequently, the company’s net profit margin is 9.39 percent and its operating margin is 12.64 percent.
The company’s revenue has marginally increased year on year, from Rs 398 crore in Q1FY23 to Rs 400 crore in Q1FY24. During the same period, net profit rose from Rs 39 crore to Rs 40 crore.
Swaraj Engines is promoted jointly by Punjab Tractors Ltd and Kirloskar Oil Engines Ltd. The Company manufactures diesel engines specifically for tractors in the range of 22 HP to above 65 HP and hi-tech engine components.
Written By Omkar Chitnis
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