Companies with a fundamentally strong nature portray some key characteristics such as low debt-to-equity ratio, strong and consistent financial numbers and ratios, etc. These characteristics help them survive the financial stress faced by peers in the industry.
Listed below is one such fundamentally strong stock from the Tata Group universe which is currently trading at a discount of more than 25 percent to its 52-week high levels:
Nelco Limited
The shares of Nelco Limited closed today at Rs 858, slipping around 0.25 percent compared to the previous closing level of Rs 860.10 apiece. The company, in the last five trading sessions, has gained a little above 20 percent from Rs 710 to the current price level. It has a market capitalization of around Rs 2,000 crores.
The company’s stock touched its 52-week high at a price of Rs 1,089.95 which was recorded in September 2022. As compared to the same, the current trading levels indicate a discount of approximately 27 percent.
Digging into the financials, the company, on a consolidated basis, has consistently reported an increase in operating revenues with the most recent movement being from Rs 260 crores during FY21-22 to Rs 313 crores in FY22-23.
In congruence, the after-tax profits have been on the rise over the last couple of years, and, during the same time horizon, moved up from Rs 16 crores to Rs 19 crores.
Coming onto the profitability metrics, the basic ones have shown marginal improvements with the return on equity (RoE) moving from 18.05 percent during FY21-22 to 18.98 percent in FY22-23. Moreover, the return on capital employed (RoCE) takes a shift from 23.58 percent to 24.82 percent.
The company nearly reduced the debt-to-equity ratio by 40 percent, i.e., a reduction from 0.61 times during FY21-22 to 0.36 times in FY22-23.
The shareholding pattern, as per the June 2023 quarter, exhibits the Promoters holding a 50.09 percent stake, and the Foreign Institutional Investors holding a 4.34 percent stake in the company.
Nelco Limited is engaged in the business of providing solutions for the purpose of management of network connectivity, turnkey communication systems, networking services, etc. The company is also involved in the sale of surveillance and security products.
Written by Amit Madnani
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