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 one could add to their watchlist for a potential upside of more than 20 percent:
Havells India Limited
With a market capitalization of Rs 1.05 lakh crores, the stocks of Havells India Limited, a leading Fast Moving Electrical Goods (FMEG) Company, started their trading session on Thursday at Rs 1,686.80 and currently trade at Rs 1,665.05, a flat movement compared to the previous close of Rs 1,662.85 apiece.
UBS, one of the well-known Financial Services Groups overseas, gave a ‘Buy’ recommendation on the stocks of Havells India Limited and gave a target price of Rs 2,040 exhibiting a potential upside of approximately 23 percent.
UBS is a multinational financial services company involved in major financial activities, including retail & commercial banking, investment banking, wealth & investment management, etc.
The investment rationale for providing such a recommendation pertains to the company’s favorable Q4 results, an uptick in real estate demand & upcoming facilities, and expectations of a turnaround in the company’s stock underperformance during the recent periods.
Having a glance at the financials, the company’s prime business indicators, viz, its operating revenues as well as after-tax profits, reported positive movements with the former rising from Rs 4,414 crores during Q3FY24 to Rs 5,442 crores during Q4FY24, and the latter, keeping the timeframe the same, rose drastically from Rs 288 crores to Rs 447 crores.
In addition to the above, the company’s ratio analysis portrays a growth in its return ratios with the return on equity (RoE) increasing from 16.17 percent during FY23 to 17.06 percent during FY24 and the return on capital employed, during the same period, rising from 20.22 percent to 21.51 percent.
According to the latest shareholding pattern data for the March’24 quarter, the company’s Promoters hold 59.43 percent, and the Foreign Institutional Investors (FIIs), recently increasing their stake, currently hold a considerable stake of 24.83 percent.
Havells India Limited is engaged in manufacturing and distributing electrical equipment for consumer as well as industrial applications. Some of its product offerings include switches, lighting, circuit breakers, air coolers, personal grooming products, motors, reactive power solutions, etc.
Written by Amit Madnani
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