Fundamentally strong stocks belong to companies with solid financial health and operational efficiency. These stocks usually demonstrate consistent earnings growth, low debt levels, and strong cash flow, which signal their resilience to economic fluctuations.
A key indicator of a company’s financial stability and efficiency is its debt level. A year-on-year reduction in debt suggests effective management of liabilities and potentially strong cash flow, reducing financial risk and enhancing profitability.
Here are three Fundamentally strong stocks that have consistently reduced debt In FY24
Maruti Suzuki India Ltd
Maruti Suzuki India Ltd is engaged in manufacturing, purchasing, and selling motor vehicles, components, and spare parts Maruti Suzuki holds a dominant position in the Indian market, with nearly 40% of the country’s passenger vehicle exports. The company exports to almost 100 countries, with key destinations including Saudi Arabia, Ethiopia, South Africa, Ivory Coast, and Chile.
In FY24, Maruti Suzuki India Limited achieved a debt-free status, improving from a debt-to-equity ratio of 0.2x in FY23. In FY22, the ratio was 0.01. Additionally, the company’s borrowings decreased significantly, from ₹1,248 crores in FY23 to ₹119 crores in FY24.
Maruti Suzuki India Limited’s operating profit margin improved from 8.78% in FY23 to 12.24% in FY24, and its net profit margin increased from 6.83% to 9.32%. The company’s ROE and ROCE were 15.75% and 19.42%, respectively.
The company’s revenue grew by 20% year-over-year, from ₹1,17,571 crore in FY22-23 to ₹1,41,858 crore in FY23-24. Over the same period, net profit surged by 64%, rising from ₹8,211 crore to ₹13,488 crore.
As of Friday, Maruti Suzuki India Ltd shares were priced at ₹12,401 each, a slight decline of 0.16% from the previous close. The company’s market capitalization stands at ₹3,89,891 crore
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Cummins India Ltd
Cummins in India, a power leader, is a group of complementary business units that design, manufacture, distribute, and service engines and related technologies, including fuel systems, air handling, filtration, emission solutions and electrical power generation systems. Cummins in India is a Group comprising seven legal entities, collectively operating 21 manufacturing facilities and 200 locations in the country.
In FY24, Cummins India Ltd’s debt-to-equity ratio decreased from 0.07x in FY23 to 0.02x. In FY22, the ratio was 0.08x. The company’s borrowings have also decreased significantly, from ₹412 crore in FY22 to ₹120 crore in FY24.
The operating profit margin improved from 18.19% in FY23 to 22.09% in FY24, while the net profit margin rose from 13.12% to 16.39%. The company reported a return on equity (ROE) of 19.18% and a return on capital employed (ROCE) of 28.76%.
Revenue grew by 16% year on year, increasing from ₹7,744 crore in FY22-23 to ₹8,959 crore in FY23-24. Net profit surged by 46%, from ₹1,130 crore to ₹1,661 crore over the same period.
As of Friday, Cummins India Ltd shares were trading at ₹3,732, reflecting a 0.07% decrease from the previous close. The company’s market capitalization stands at ₹1,03,452 crore on the stock exchange.
Cyient DLM Ltd
Cyient DLM is a leading electronics system design and manufacturing player, which provides system design, integration, testing, and manufacturing of electronic components and subsystems for original equipment manufacturers (OEMs) in the aerospace and defense sectors and other high-tech engineering segments. It has customers in India, Europe, North America, China and Japan.
In FY24, Cyient DLM Ltd’s debt-to-equity ratio dropped significantly from 1.80x in FY23 to 0.21x. Borrowings decreased from ₹337 crore in FY22 to ₹192 crore in FY24. The company currently has an order backlog of ₹2,170 crore.
The operating profit margin improved from 8.97% in FY23 to 9.77% in FY24, while the net profit margin rose from 3.81% to 5.13%. The return on equity (ROE) and return on capital employed (ROCE) are 11.1% and 10.6%, respectively.
Revenue increased by 43% year on year, growing from ₹832 crore in FY22-23 to ₹1,192 crore in FY23-24. Net profit surged by 90%, rising from ₹32 crore to ₹61 crore over the same period.
As of Friday, Cyient DLM Ltd shares were trading at ₹752, down 0.24% from the previous close. The company’s market capitalization is ₹5,960 crore on the stock exchange.
Written by Omkar Chitnis
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