The broader market Nifty 50 index is currently attempting to reach to a new all-time high and the rally from the lows of ~16,800 odd levels has been stupendous. As the index has rallied over 1,700 points in a very short span of time, still there are some of its constituents that are currently trading at very inexpensive valuations.
I have taken the price-to-book of P/B ratio as the valuation metric which is simply the CMP divided by the book value per share. Any company trading at a book value of less than 1 is considered to be undervalued and there are 2 such companies in the index.
Oil and Natural Gas Corporation Limited
Oil and Natural Gas Corporation (NS: ONGC ) is a large-cap energy company that is engaged in the exploration, development, and production of crude oil and natural gas . The company has a market capitalization of INR 1,94,616 crores (the highest m cap among all CPSEs) and currently trades at a P/B ratio of a mere 0.69, making it currently the cheapest Nifty 50 stock. It also holds a very strong credit rating of AAA from ICRA (NS: ICRA ), CareEdge & India Ratings and Research.
FY23 was the best year for the company so far as it posted a record revenue of INR 6,92,937.36 crores which was a healthy 38.5% YoY jump. The net profit declined by around INR 10,082 crores in FY23 but that was primarily due to tax provisioning. The stock is also a darling of dividend lovers and it is currently trading at a massive yield of 9.05%.
Grasim Industries Limited
Grasim Industries (NS: GRAS ) is a holding company of businesses engaged in cement manufacturing, textile, chemicals, paints etc, having a market capitalization of INR 1,12,286 crores. The company is one of the leading producers of water treatment chemicals and its chemical business has a presence in the value chain for pharma, dyes and polymers.
In FY23, the company’s CapEx surged to INR INR 4,307 crores, mainly towards new high-growth businesses such as decorative paints and B2B e-commerce. Expansion plans also led the company to post its highest-ever revenue of INR 1,21,448.09 crores in FY23. Despite a decent rally of 28.9% in the last 12 months, the stock is still trading at a P/B ratio of a mere 0.97, making it the second lowest-valued stock in the blue-chip Nifty 50 index.
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