3 PSU Stocks with 30-40% Upside Potential


3 min read
3 PSU Stocks with 30-40% Upside Potential

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1) Engineers India (Current Price: 68.55 Rs, Target: 90, Tenure: 3 to 6 months)

Set up in 1965, Engineers India is one of India's leading Engineering Consultancy and EPC companies in Hydrocarbons and Petrochemicals. Company has handled over 5,000 assignments including over 400 major projects completed.

Why I selected this stock? (Major Reasons):

1) This is a ZERO DEBT Company.
2) Dividend Yield: 7.40 %
3) Maintained healthy dividend payout of 70.44%.
4) Cash in hand stood at ₹2,500 crore, with the company evaluating options such as higher dividend payouts and investments into strategic assets to boost RoEs.

Fundamental Analysis:

Market Cap:  4,398 Cr. | Stock P/E: 12.72 | Debt to equity: 0.0 | ROCE: 28.78 % | ROE: 17.78 % | Free cash flow 5years:  1,770 Cr. | Interest Coverage: 299.96 | Inventory turnover ratio: 1.95 | Pledged percentage: 0.00 %

Brokerages commentary:

Buy Engineers India, target price Rs 112: ICICI Securities
Buy Engineers India; target of Rs 89: Motilal Oswal

2) GAIL (Current Price: 91 Rs, Target: 130, Tenure: 3 to 6 months)

GAIL (India) is also engaged in the business of Oil and Gas Exploration and Production to increase the access to gas supplies through equity and joint venture participation. Gail is the largest state-owned natural gas processing and distribution company in India.

Why I selected this stock? (Major Reasons):

1) Company is virtually debt free. (D/E=.14)
2) Dividend Yield: 7 %
3) Maintained healthy dividend payout of 33%.
4) Bounce Back in price in 'likely'.
5) Profit growth of 24.11% CAGR over last 5 years

Fundamental Analysis:

Market Cap:  41,538 Cr. | Stock P/E: 4.84 | Debt to equity: 0.14 | ROCE: 19.97 % | ROE: 19.26 % | Free cash flow 5years:  11,451 Cr. | Interest Coverage: 28 | Inventory turnover ratio: 21 | Pledged percentage: 0.00 %

Brokerages commentary:

Hold GAIL (India), target price Rs 101: ICICI Securities
Buy GAIL; target of Rs 130: Emkay Global Financial
Accumulate GAIL; target of Rs 115: Dolat Capital


3) COAL India (Current Price: 124 Rs, Target: 175, Tenure: 3 to 6 months)

Coal India Ltd is mainly engaged in mining and production of Coal and also operates Coal washeries. The major consumers of the company are power and steel sectors. Consumers from other sectors include cement, fertilisers, brick kilns etc.

With a modest production of 79 Million Tonnes (MTs) at the year of its inception CIL today is the single largest coal producer in the world and one of the largest corporate employer with manpower of 272445 (as on 1st April, 2020).


Why I selected this stock? (Major Reasons):

1) Company has less debt.
2) Dividend Yield: 9.67 %
3) Maintained healthy dividend payout of 78%.
4) Bounce Back in price in 'likely' as major resistance is at 121 levels.
5) 3 Years ROE 54.97%

Fundamental Analysis:

Market Cap:  76,479 Cr. | Stock P/E: 5.40 | Debt to equity: 0.20 | ROCE: 73 % | ROE: 57 % | Free cash flow 5years:  35,629 Cr. | Interest Coverage: 30 | EVEBITDA: 2.26 | Pledged percentage: 0.00 %

Brokerages commentary:

Buy Coal India, target price Rs 165: Edelweiss
Buy Coal India, target price Rs 190: Motilal Oswal
Buy Coal India, target price Rs 258: ICICI Securities
Buy Coal India, target price Rs 208: Emkay Global

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Akshay Seth
Research Analyst (SEBI Regd.)
Linkedin | akshay.equity@gmail.com

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