A company is said to be ‘fundamentally strong’ when it portrays a specific set of characteristics, viz, strong and consistent financial performance, lower leverage ratios, and many more.
Listed below is one such fundamentally strong stock that is associated with the ‘automobile’ sector that one should add to their watchlist for a potential upside of more than 30 percent:
Hero MotoCorp Limited
With a market capitalization of Rs 93,037.58 crores, the stocks of Hero MotoCorp Limited started their trading session on Wednesday at Rs 4,724.85 and currently trades at Rs 4,653.70, slipping approximately 0.40 percent compared to the previous closing levels of Rs 4,669.80 apiece. In the last six months, the company’s stock gained more than 50 percent for its holders.
Having a glance at the financial reports, the company, during the recent quarters, reported an increase in its basic business indicators, viz, its operating revenues as well as after-tax profits.
The former rose from Rs 9,533 crores during Q2FY24 to Rs 9,788 crores during Q3FY24, and the latter, keeping the timeframe the same, took an upward shift from Rs 1,007 crores to Rs 1,091 crores.
In addition to the above, the company’s ratio analysis exhibited the return on equity (RoE) increasing from 14.62 percent during FY21-22 to 16.87 percent during FY22-23. During the same time horizon, the company’s return on capital employed (RoCE) shifted from 19.51 percent to 22.14 percent.
Having a positive outlook for the company, Sharekhan, one of the well-known Brokerages based in India, gave a ‘Buy’ recommendation on the auto company’s stock with a target price of Rs 6,057 representing a potential upside of around 30 percent compared to the prevailing share price level.
The rationale behind providing such a recommendation pertains to improving EBITDA margins, building up of premium product portfolio, and plans to expand its ‘EV’ offerings among other factors.
The latest shareholding pattern data, as of the December 2023 quarter, portrays the company’s Promoters holding a 34.76 percent stake, and the Foreign Institutional Investors (FIIs) holding a considerable stake of 28.34 percent in the company.
Domiciled in India, Hero MotoCorp Limited is engaged in manufacturing and distributing motorcycles, scooters, and other related spare parts. Deriving a vast majority of revenue
from domestic operations, the company also has operations in South Asia, Africa, Latin America, and the Middle East.
Written by Amit Madnani
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