The ‘Fundamentally Strong’ nature of a company is observed via some financial parameters with the first being the low ‘debt-to-equity’ ratios causing less burden on the company to pay off the obligations. Moreover, such companies have the ability to operate in times of financial distress.
Listed below is one such fundamentally strong Large-cap stock to buy now for an upside of 14 percent:
Hindustan Unilever Limited:
Hindustan Unilever Limited (HUL), a player in the consumer goods industry, offers over 50 brands in wide categories, i.e., from hygiene to cosmetic products. Some of the products in its portfolio include brands such as Lifebuoy, Vaseline, Dove, Kissan, and many others.
The company’s shares closed in the green today at Rs 2,716, gaining around 1 percent as compared to the previous closing price of Rs 2,689.70. The company has a market capitalization of Rs 638,066 crores.
Digging into the financials of the company, the operating revenues have consistently shown improvements in the last five financial years with the most recent movement from Rs 52,446 crores during FY21-22 to Rs 60,580 crores in FY22-23. Moreover, the net profit numbers, keeping the timeframe the same, have gone up from Rs 8,887 crores to Rs 10,145 crores.
Coming onto the profitability ratios, the return on equity (ROE) increased from 18.09 percent during FY21-22 to 20.11 percent in FY22-23. Likewise, the return on capital employed (ROCE), during the same time horizon, took a shift from 20.29 percent to 22.14 percent.
In addition to the above, the company has been able to maintain its margins within a decent range with the net profit margin reported at 16.95 percent during FY21-22 and at 16.74 percent in FY22-23. It has reported a ‘nil’ debt-to-equity ratio in the last four financial years.
Having a positive outlook for the company, Motilal Oswal has given a ‘Buy’ recommendation on the stock with a target price of Rs 3,100 indicating an upside of 14 percent as compared to the prices prevailing in the market.
The rationale behind recommending the stock is contributed by factors such as the company’s technological superiority, stable financials, etc.
According to the shareholding pattern data available for the March 2023 quarter, Promoters of the company hold a 61.9 percent stake, and Foreign Institutional Investors hold a 14.36 percent stake in the company.
Written by Amit Madnani
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