3 Undervalued Stocks For Budget 2024 | Budget Stocks

Summary

The video script discusses the Indian government's upcoming budget for 2024, highlighting expectations in the market and among investors. It explores the unique problem of high valuation in sectors like railways, defense, and renewable energy, which have seen significant rallies due to government focus. The speaker proposes to offer solutions by discussing three stocks from different sectors that are well-established from a valuation and growth perspective, aiming to provide educational insights for investors to make informed decisions.

Takeaways

• 📅 The Indian government's budget for 2024 is highly anticipated by the market and investors, with a unique problem arising due to the focus on sectors like Railway, Defense, and Renewable Energy in the past two years.
• 🔍 Investors are currently trading at high valuations due to the significant rally in the aforementioned sectors, despite the BJP's manifesto indicating a continued focus on these areas.
• 🏢 The video discusses three stocks from different sectors that are well-established from a valuation and growth perspective, offering an educational viewpoint for analysis.
• 🏛 The first sector highlighted is NBCC, which operates under the Ministry of Housing and Urban Affairs, with its business divided into Project Management and Consultancy, Engineering Procurement and Construction, and Real Estate segments.
• 📈 NBCC's financials show consistent growth in sales, operating profit margins, and net profit, with a positive cash flow from operating activities and improving cash conversion cycle.
• 🚄 The second sector discussed is Railway, focusing on the Colzon Protection System to prevent train accidents, with ABB Power leading as a prominent player in this segment.
• ⚡ The third sector is Renewable Energy, which is directly connected to the Power Transmission business, emphasizing the government's focus and the potential for growth in power demand.
• 🌐 Power Grid Corporation is identified as a key player in the power transmission sector, with a significant portion of its revenue coming from transmission fees and a high operating profit margin.
• 📊 The script emphasizes the importance of analyzing financial statements, market capitalization, and valuation metrics like P/E ratio, P/B ratio, and return on equity when evaluating a company's valuation.
• 📉 The video also discusses the potential for a company's stock price to be overvalued despite high past returns, using examples like Cochin Shipyard and Sana BD to illustrate the impact of earnings growth on stock valuation.
• 👥 Shareholding patterns, including promoter and public holdings, are highlighted as important indicators of confidence in a company's future prospects.

Q & A

What is the main topic of the video script?

The main topic of the video script is an analysis of certain sectors and stocks in the Indian market, particularly focusing on the upcoming budget and its potential impact on investors' expectations.

What are the unique problems investors are facing according to the script?

The unique problem investors are facing, as mentioned in the script, is the uncertainty in the market due to the government's focus on sectors like Railway, Defense, and Renewable Energy in the past two years, which has led to a rally in these sectors and high valuations.

What is the government's focus in the 2024 manifesto as per the script?

According to the script, the government's 2024 manifesto focuses on continuing the focus on sectors like Railway and Defense, along with introducing new sectors into the fold.

What is the significance of NBCC in the script?

NBCC is significant in the script as it is identified as a company that would benefit from the government's focus on infrastructure development, being involved in project management, consultancy, and construction.

What are the three segments of NBCC's business according to the script?

The three segments of NBCC's business mentioned in the script are Project Management and Consultancy (PMC), Engineering Procurement and Construction (EPC), and Real Estate.

What is the financial performance trend of the company discussed in the script?

The script indicates that the company has shown consistent growth in sales, operating profit margins, and net profit over the last few quarters, suggesting a positive financial performance trend.

What is the role of the 'Kavach' system in the Railway sector as per the script?

The 'Kavach' system, as discussed in the script, is a collision protection system for railways designed to prevent accidents by using sensors along the tracks to avoid collisions between trains.

What is ABB Power's involvement in the Railway sector according to the script?

ABB Power, as per the script, is involved in the installation of the 'Kavach' collision protection system in the Railway sector, along with other segments like electronics and defense.

What are the financials of ABB Power like according to the script?

The script suggests that ABB Power has shown impressive returns over the last year, with more than 250% growth, and has consistently increased its profits and cash flow from operating activities.

How does the script analyze the valuation of a company?

The script analyzes the valuation of a company by looking at parameters such as market capitalization, P/E ratio, P/B ratio, return on equity, and comparing them with industry standards and historical data.

What is the conclusion about the potential of the stocks discussed in the script?

The conclusion in the script is that despite the past performance and current high valuations, the stocks discussed have the potential for future growth based on the government's continued focus on infrastructure and other sectors.