5 fundamentally strong stocks trading near 52-week low. Time for bottom fishing?
7 min read 27 Mar 2023, 12:00 PM ISTIs this the right time to go bottom fishing for these undervalued gems?
PremiumAs the old saying goes, "buy low, sell high," there's no better time to put this into practice when the stock market is experiencing a dip.
However, it can be difficult to know which stocks to pick during these uncertain times. Some investors may be tempted to focus on growth stocks, while others may prefer to seek out bargains among more established companies.
The current market condition provides opportunity for bottom fishing. So, in today’s article, we’ll look at five fundamentally strong stocks that are currently trading at or near their 52-week lows.
These companies may have experienced a correction recently, but they are fundamentally strong with sound financials, good return ratios, and are currently trading at attractive valuations.
#1 Geojit Financial Services
First on this list isGeojit Financial Services.
Geojit Financial Services is the flagship company of the Geojit group. It operates as an investment services company in India headquartered in Kochi, Kerala.
It was the first company in India to launch online-trading facilities, develop franchise models of sub-broking, form joint ventures in west Asia, and the first to begin commodity futures trading in pepper, cardamom, gold, and silver in India.
The product offerings of the company include equities and derivatives to mutual funds, life and general insurance, commodities derivatives, and portfolio management services.
Shares of the company are currently trading very close to its 52-week low. In the past one year, Geojit shares are down 32%.
This could be due to growing competition. In the broking segment, there's intense competition and established players like Angel Broking are also seeing an impact on their business.
For the first three quarters of financial year 2023, Geojit has remained profitable and reported a profit of ₹660 million (m).
In financial year 2022, the company made a profit of ₹1,429 m on sales of around ₹5,000 m.
To reduce dependence on the income generated from broking segment, the company is looking to get into the distribution business.
At the current price, the company is trading at a price to earnings (PE) multiple of 10.3 times, well below the industry average that is 15.4 times.
The price to book value (P/BV) multiple on the current price comes to 1.8x, which is also below the industry average of 2.5x.
#2 Manali Petrochemicals
Next on this list is Manali Petrochemicals.
Part of the AM International group, Manali Petrochemicals is a manufacturer of petrochemical products, namely, propylene oxide (PO), propylene glycol (PG), polyols, system polyols and other allied products.
The company’s products are import substitutes and cater to a wide variety of end-user industries. You could say the company has a virtual monopoly as it’s the only Indian company operating in the segment.
In the past one year, shares of the company have corrected a massive 46%.
Things started to go south for the company as it reported weak quarterly performance for not one but successive quarters.
If we compare its performance for nine months ended December 2022, sales are down 32% compared to the year ago period while net profit is down a whopping 83%!
For the nine months ended December 2022, Manali Petrochemicals has reported a profit of ₹511 m as compared to a profit of ₹3,071 m during the same time last year.
The company’s product prices are falling while the double whammy is in the form of rising input costs, bringing down the margins.
Around 40% of the company’s sales go into Europe…so recession concerns in the UK and impact of power crisis are also some factors dragging the company’s performance.
Another reason behind the tepid performance is competition. The company faces competition from international players, who import at lower prices to India.
The company is currently in the process of capacity expansion. It’s setting up a polyester polyol plant in 2 phases.
At the current price, the company is trading at a PE multiple of 8.7 times, as against the industry average of 30.5.
#3 Heranba Industries
Third on this list is Heranba Industries.
Heranba Industriesis one of the leading agrochemical players in India.
The company is the market leader in the synthetic pyrethroids market. Pyrethroids find usage in significant applications across pest protection, environmental health and crop care.
Its clients include big names such asPI Industries, Sharda Cropchem,UPL,Rallis India,Dhanuka Agritechto name a few.
In the past one year, shares of the company have fallen over 50% and continue to hit 52-week low.
The sharp correction is due to company not meeting the guidance and market expectations.
The company reported a dull quarterly performance for the quarter ended December 2022. Revenues for the quarter stood at ₹2.8 billion (bn), down 29% YoY.
The revenue degrowth was on the back of geopolitical situation, inflationary pressures and demand slowdown leading to pricing erosion. The domestic technical business was also witnessed muted demand due to high inventory.
Operating profit declined 64% YoY due to high raw material costs, along with increased power and freight costs. The operating profit margin came in at 9%, down from 18% (YoY). The net profit too declined by 73% YoY.
The lockdown in China also had an impact as 20% of the company's revenues comes from China.
The management has shared a weak outlook for the near term, which has further dampened sentiment.
However, Heranba has all the elements that could help it make a dent in regulated markets - a strong product portfolio, distribution network, experienced promoters, and new product launch capabilities.
With multiple molecules going off patent in the near future, the company aims to capitalise on significant growth opportunities in the agrochemicals segment.
At the current price, the company is trading at a PE multiple of 8.7 times, way below the industry average that is 27.7 times.
Its price to book value ratio is 1.5x, compared to the industry average P/BV of 5.3x.
#4 Shreyas Shipping
Fourth on the list is Shreyas Shipping.
The company is a market leader in domestic coastal container shipping. Over the years, the company has diversified into logistics, transportation, warehousing, and distribution services.
Being part of the Transworld group comes with synergies as in the past, the group has provided financial support to Shreyas Shipping.
In the past one year, shares of the company have corrected by 30% and currently trade very close to its 52-week low.
The shipping sector was one of the few sectors that benefitted enormously from the Russia-Ukraine war. Spot freight rates in the key tanker segments surged multifold, nearly 8 to 9 times from a year ago.
However, the shipping industry is inherently cyclical. And we’re probably seeing the cyclical effect play out in the form of weakness and sluggish demand conditions from China.
The challenges are plenty as China controls the world's container manufacturing market. And there's not much traction for containers in India. The demand for containers is from smaller rail operators and coastal shipping operators with very small requirements.
Shreyas Shipping has undertaken a huge capex plan worth ₹3 bn for new vessel purchases and dry-docking expenses for the next three years. At present, Shreyas Shipping has limited capacity. But this will change by 2025.
At the current price, the company is trading at a P/BV ratio of 0.7x, compared to the industry average P/BV of 1.1x.
#5 Supriya Lifesciences
Last on the list is Supriya Lifesciences.
Established in the year 1987, Supriya Lifescience is a global leading manufacturer of active pharmaceutical ingredients (API).
It also focuses on products of various therapeutic segments like - Anti-Histamine, Anti-Allergic, Vitamins, Anaesthetics, Anti- Asthmatics, etc.
In the past one year, shares of the company have corrected by 60% owing to weak performance for consecutive quarters.
For the December 2022 quarter, the pharma company continued its weak performance with revenue coming in at ₹1 bn, down 10% YoY. However, the losses were magnified to 63.4% at the operating profit level with margin shrinking to 13.4% from 32.8% (YoY).
The demand for company's products was impacted due to lockdown in major Chinese cities and drop in demand of two new products.
The company’s management has stated that they’re close to finalizing two CMO /contract manufacturing opportunities. It is also working on its R&D pipeline to broaden the range of products and therapeutic options.
At the current price, the company is trading at a P/BV ratio of 2.3x, compared to the industry average P/BV of 3.9x.
The company trades at a trailing twelve months (TTM) PE multiple of 15.4 times, as against the industry average of 35.8 times.
Which other good quality stocks are trading near their 52-week low?
Apart from the above, here’s a list of companies with good fundamentals, which are trading close to their 52-week low.
Happy Investing!
Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
