In a surprise twist, Indian benchmark equity indices closed in green at the end of business today. BSE Sensex 30 ended 198.44 points or 0.34% up to settle at 58,664.33 on November 23. NSE Nifty50 followed the suit to end at 86.80 points or 0.50% higher at 17,503.35. All the major sectoral indices ended in the green except the IT sector. Realty, metal, power, capital goods, PSU bank, pharma, and oil & gas indices were up in the 1% to 3% range. Notably, the BSE midcap and small-cap indices surged a little over 1% each at the end of the session. The recent market fall offers a good opportunity to investors with a medium to long term horizon. After scanning the stock universe, we came across scrips that hold the potential to deliver decent returns in a medium to long term horizon.
1. Bharat Forge Ltd (NS:BFRG)
Our first pick today is a well-known forging company—Bharat Forge Ltd. You may refer to the detailed of the stock. The demand outlook for the company in both India and abroad remains robust over a medium-term time frame. Bharat Forge is poised to gain from the recovery in India’s infrastructure spending. The passing of the $500 billion infrastructure spending bill should catapult demand for heavy equipment such as trucks and construction equipment. It augurs well for the company. BFL will also get benefitted from the ramp-up in the Indian defence sector which is targeted to reach 10% of turnover in the next two years. Bharat Forge has a keen focus on is on mounted guns, armored vehicles and artillery guns. Defence is expected to contribute 10% of its total revenue in the next two years. The company’s global original equipment manufacturer (or OEM) base provides a good ground for the stock’s future growth.
The company has posted another strong quarterly result in the second quarter ended September 30, 2021. Its revenue was up 82% year-on-year and 17% quarter-on-quarter in Q2FY2022. Exports accounted for 59% of revenue in the quarter as against 52% in Q2FY2021. Its EBITDA margin expanded 1.7% quarter-on-quarter at 30.2%. Promoters’ holding remained unchanged in the quarter, whereas DIIs and MFs raised their holding by 0.9% in the quarter. The scrip returned 51% in a year, 38.6% in year-to-date and 14.5% in six months.
2. JSW Steel (NS:JSTL) Ltd
JSW Steel Ltd aims to expand its crude steel capacity from 18 MnTPA in FY2020 to 45 MnTPA within the next decade. In 2021, the company completed the acquisition of BPSL and became the largest steel producer in India. JSW Steel is the owner of the single largest steel plant in India with a capacity of 12 MnTPA. It has a well-diversified portfolio of products among the major steel manufacturers in India. JSW has reported strong margins further boosted by significant downstream capacities producing value-added and special products. The company has demonstrated the ability to judiciously shift between domestic and international markets based on market conditions in the past. It is one of the lowest costs of conversion in India and globally. The company’s capacity growth CAGR of 14% in the FY2002-21 period is ahead of the industry average of 12%.
It has a healthy balance sheet and stable cash flow. You should note that monetary and fiscal stimulus in India and abroad should drive the economic recovery faster. The USA has passed a $1 trillion infrastructure bill—the biggest spending on US public works in decades. The current global energy transition is anticipated to result in significant metal intensive investments over the next few years. Environmental concerns, a government crackdown, removal of export rebate and production curbs in China has led to subdued exports from the dragon country. The raw material price environment continues to be strong overall despite the recent pullback in iron ore prices. Steel prices and margins remain healthy owing to supportive demand fundamentals. Revenue CAGR of the company in FY2002-21 stood at a decent 23%, whereas the EBITDA CAGR during the period remained at an impressive 25%.
Most notably, promoters have very slightly raised their holding in the company in September 2021 quarter. Mutual funds and DIIs have too marginally raised their stake in the quarter. The scrip has doubled in a year and returned 75% on a year-to-date basis. Its returns were positive on a month and five days basis. On November 23, the stock was up 4%.
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Which sector is good for invest long-term likely 5-6 yearLike 0
Which sector is good for invest long-term likely 5-6yearLike 0
jsw steel 7 percent down.Like 0
thanks you sirLike 0