A company is said to be “fundamentally strong” when it possesses a certain set of characteristics, viz, strong and consistent financials, low or zero leverage ratios, and many more.
Listed below is one such fundamentally strong stock that is trading at a discount of more than 30 percent from its 52-week high level:
Gujarat Fluorochemicals Limited
Gujarat Fluorochemicals Limited is engaged in the business of producing refrigerants, chloromethanes, caustic soda, and other chemicals in India.
With a market capitalization of Rs 30,600 crores, the company’s stock is currently trading at Rs 2,785, gaining around 0.15 percent as compared to the previous close of Rs 2,781.50 apiece.
The company’s scrip hit its 52-week/all-time high mark in October 2022 at a price of Rs 4,172.95. The current price levels exhibit a discount of approximately 33 percent compared to the 52-week high level.
Having a look at the revenue mix, the company earns a huge sum from the sale of Polytetrafluoro-ethylene products in the European markets.
One of the factors leading to the slip in stock prices is pertaining to the revenue shocks from the potential ban on polyfluoroalkyl substances (PFAS) in the coming years. The European Union (EU) and other authorities seek regulation of the consequences of the accumulation of such chemicals on the biological ecosystem.
Coming onto the consolidated financials, the company, in the last couple of financial years, has shown consistent growth in numbers.
The basic operational metrics such as the revenues and net profits went up with the former moving from Rs 3,953 crores during FY21-22 to Rs 5,684 crores during FY2-23, and, the latter, taking a shift from Rs 775 crores to Rs 1,323 crores.
In addition to the above, the profitability metrics such as the return on equity (RoE) rose from 18.49 percent during FY21-22 to 24.06 percent during FY22-23. The return on capital employed (RoCE) increased as well from 22.60 percent to 31.52 percent.
The company has successfully reduced its debt-to-equity ratio from 0.36 times during FY21-22 to 0.27 times during FY22-23.
According to the June 2023 quarter, the shareholding pattern data portrays the Promoters holding a 63.81 percent stake (4.93 percent pledged), and the Foreign Institutional Investors (FIIs) holding a 6.44 percent stake in the company.
Written by Amit Madnani
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