Public Sector Undertakings (PSUs) are public sector companies established and owned by the Government of India or State governments of the country. Listed below is one such PSU stock that is debt-free in which brokerage sees more than 20 percent upside:
NMDC Limited
With a market capitalization of Rs 43,475.54 crores, the stocks of NMDC Limited started their trading session on Wednesday at Rs 147.85 and currently trade at Rs 148.35, a flat movement as compared to the previous closing levels of Rs 148.20 apiece.
Having a look at the financials, the company, on a sequential basis, has seen a dip in its basic business parameters such as the operating revenues and net profits.
The operating revenues went down from Rs 5,851.37 crores during Q4FY22-23 to Rs 5,394.66 crores during Q1FY23-24, and, the net profits, during the same time horizon, declined from Rs 2,277.13 crores to Rs 1,661.2 crores.
As a result of the same, the profitability metrics as well as the net profit margins of the company took a hit. The return on equity (RoE) went down from 39.42 percent during FY21-22 to 27.26 percent during FY22-23, and, the return on capital employed (RoCE) took a downshift from 50.51 percent to 36.04 percent keeping the timeframe the same.
Something on the positive side is the increasing current ratio as well as a reduction in the debt-to-equity ratio. The current ratio rose from 1.75 times during FY21-22 to 1.93 times during FY22-23 enhancing the short-term liquidity requirements of the company, and, the debt-to-equity ratio, having the same effect, reduced from 0.10 times to 0.02 times.
Seeing the dividend history, the company portrays a high dividend yield of around 4.45 percent.
Despite the past underperformance, ICICI Securities, having a positive outlook for NMDC Limited, gave a ‘buy’ call for the company’s stock with a target price of Rs 180 indicating an upside of around 21.33 percent as compared to the prevailing market prices.
The rationale behind providing such a recommendation pertains to robust operating performance, sales volume progression, increased production capacity, and many more.
According to the latest shareholding data available for the June 2023 quarter, the President of India, the company’s sole Promoter, holds a 60.79 percent stake, and the Foreign Institutional Investors (FIIs) hold a 6.99 percent stake in the company.
NMDC Limited is involved in the business of mining a wide range of minerals including copper, iron ore, gypsum, magnesite, diamond, etc. ‘Iron Ore’ accounts for most of the revenue of the company.
Written by Amit Madnani
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