A company is said to be ‘fundamentally strong’ when it portrays a specific set of characteristics, viz, strong and consistent financials, lower leverage ratios, and many more.
Listed below is one such fundamentally strong stock in which HDFC Securities see a potential upside of 25 percent:
Stylam Industries Limited
With a market capitalization of Rs 3,114.38 crores, the stocks of Stylam Industries Limited closed at Rs 1,837.60 on Thursday, a flat movement as compared to the previous closing levels of Rs 1,839.20 apiece.
Digging into the financials, the company, during the recent financial years, has been able to increase its basic business parameters such as operating profits and net profits.
The former moved up from Rs 659.35 crores during FY21-22 to Rs 952.13 crores during FY22-23, and, the latter, during the same time period, shifted up from Rs 61.11 crores to Rs 95.98 crores.
In addition, the company’s profitability metrics showed positive movements with the return on equity (RoE) increasing from 21.23 percent during FY21-22 to 26.36 percent during FY22-23, and the return on capital employed (RoCE), keeping the timeframe the same, rising from 24.76 percent to 31.89 percent.
The net profit margins of the company also took a shift from 9.27 percent during FY21-22 to 10.08 percent during FY22-23. During the same time horizon, the debt-to-equity ratio, one of the most tracked leverage metrics, fell from 0.25 times to 0.11 times.
HDFC Securities, one of the well-known Brokerages based in India, gave a ‘Buy’ recommendation for the stock with a target price of Rs 2,300 indicating a potential upside of around 25 percent as compared to the prevailing stock price level.
The investment rationale behind providing such a recommendation pertains to the recent robust financial performance, consistent dividends, and strong estimates for the EBITDA as well as PAT levels in the coming few financial years.
As per the latest shareholding pattern for the quarter ended September 2023, the company’s Promoters hold a 54.61 percent stake, and the Foreign Institutional Investors (FIIs) hold a 3.99 percent stake in the company.
Stylam Industries Limited is involved in the business of manufacturing decorative laminates under the brand name “STYLAM” and exporting its products primarily to European and South East Asian countries. The company manufactures a wide range of high-quality laminates, specialty surfaces, solid surfaces, and compact laminates.
Written by Amit Madnani
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