Companies included under the category of ‘fundamentally strong’ stocks usually portray a certain set of attributes including lower leverage ratios, strong financial numbers, and many more.
Listed below is one such fundamentally strong stock that gets a ‘Buy’ call with a potential upside of 31 percent:
Galaxy Surfactants Limited
With a market capitalization of Rs 9,540.70 crores, the stocks of Galaxy Surfactants Limited closed at Rs 2,690.95 in Thursday’s trading session, a gain of around 0.40 percent compared to the previous closing price of Rs 2,681.25 apiece.
Digging into the yearly financials of the company, the basic business parameters such as the operating revenues and after-tax profits have risen consistently since the last three financial years.
The most recent movement was from Rs 3,685.71 crores during FY21-22 to Rs 4,445.24 crores during FY22-23, and, the after-tax profits increased from Rs 262.78 crores to Rs 380.98 crores.
In addition, the profitability metrics such as the return on equity (RoE) as well as the return on capital employed (RoCE) improved in the recent period with the former increasing from 18.28 percent during FY21-22 to 22.04 percent during FY22-23, and the latter taking a shift up from 19.5 percent to 24.16 percent keeping the timeframe the same.
The debt-to-equity ratio of the company showed a dip during the recent period from 0.23 times during FY21-22 to 0.14 times during FY22-23.
HDFC Securities gave a ‘Buy’ recommendation for the stock with a target price of Rs 3,496 indicating an upside of approximately 31 percent compared to the current price prevailing in the market.
The rationale behind providing such a recommendation pertains to higher Q1FY24 revenue numbers and margins, improving the company’s rural presence, etc.
According to the shareholding pattern data available for the June 2023 quarter, the company’s Promoters hold a huge stake, implying ‘skin in the game’, of 70.93 percent stake, and the Foreign Institutional Investors (FIIs) hold a 2.99 percent stake in the company.
Founded in 1980, Galaxy Surfactants Limited is engaged in the business of manufacturing and marketing surfactants and other specialty ingredients in India. Some of the products offered by the company include ether sulfates, preservatives and blends for personal care, home care products, etc.
Written by Amit Madnani
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