Top 5 PSU Stocks with 30-50% Upside Potential in 2021

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Top 5 PSU Stocks with 30-50% Upside Potential in 2021

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2020 made us clear that you can't underestimate a PSU stock in terms of returns. In CY20, Stocks like Gujarat Gas, SAIL, SBI surged more than 100%.
If you see data of last 3 months only, then you will find out that even dead stocks like ONGC, NTPC surged more than 30-40%. BSE PSU index is up 40% in just 2-3 months.

If you are holding stocks which are fundamentally strong then today or tomorrow they are likely to give you good returns, no matter if its a financial crisis or a health crisis or maybe both.

A few months back I selected 3 PSU Stocks with 30-40% Upside Potential, all of them are delivering better returns. Based on the research I came up with the Top 5 PSU Stocks with 30-50% Upside Potential in 2021:

Here we go:

1) NBCC (India) Ltd
(Current price: 33.15 Rs. ; Target Price: 50 Rs. ; Tenure: 1 Year)

About NBCC: NBCC (India) Limited is a blue-chip Government of India Navratna enterprise and a Central Public Sector undertaking. It operates into three major segments namely Project Management Consultancy, Real Estate and Engineering Procurement & Construction.

Why I Selected NBCC?

  • NBCC is debt free company.
  • Company witnessed QoQ revenue growth of 95.35%, which is highest in the last 3 years.
  • The company has a strong order book worth Rs 83,000 cr which is indicative of the revenue stream for the next 3-4 years.
  • The company has a cash reserve of Rs 4,700 cr.
  • Even if the valuations are considered on the basis of FY22 forward EPS basis. the valuations further come down and are available at a PE multiple of 8.
  • In terms of price, it is very cheap. ROCE is 20.5 %, Free Cash Flow 5Yrs is ₹ 2,407 Cr. and Promoter holding is 61.8 %.
  • 19 out of 28 major indicators show that this stock is Bullish on charts.

The budget will be a big trigger for this stock as they are likely to get orders from the governments to develop their land banks.

Explore: Get one 'Fundamentally strong stock, Everyday!' here

2) Hindustan Aeronautics Ltd
(Current price: 970 Rs. ; Target Price: 1300 Rs. ; Tenure: 1 Year)

About HAL: Hindustan Aeronautics is engaged in the business of Manufacture of Aircraft and Helicopters and Repair, Maintenance of Aircraft and Helicopters. It is governed under the management of the Indian Ministry of Defence.

Why I Selected HAL?

  • India approved procurement of 73 Tejas Mk-1A fighter aircraft and 10 Tejas Mk-1 trainer aircraft. The total cost for the aircraft will be Rs 45,696 crore, along with design and development sanctions worth Rs 1,202 crore. Around 500 Indian companies, including micro, small and medium enterprises in the design and manufacturing sectors, will be working with HAL in this procurement.
  • It is a part of further push to Atmanirbhar Bharat initiative and will boost indigenisation of defence production and the defence industry in the country.
  • Company has strong fundamentals: ROCE: 23.9 %, ROE: 22.0 %, Debt to equity: 0.31.
  • Stock is providing a good dividend yield of 3.29%.
  • 19 out of 28 major indicators show that this stock is Bullish on charts.

Also read: Top 10 Potential Wealth Creators of 2021

3) Bharat Heavy Electricals Limited
(Current price: 39.40 Rs. ; Target Price: 50 Rs. ; Tenure: 1 Year)

About BHEL: Established in 1964, BHEL is India's largest power generation equipment manufacturer. It is an integrated power plant equipment manufacturer engaged in design, engineering, manufacture, erection, testing, commissioning and servicing of a wide range of products and services for the core sectors of the economy, viz. Power, transmission, Industry, Transportation, renewable Energy, Oil & Gas and Defence.

Why I Selected BHEL?

  • Tesla is coming to India next year, the government is planning to set up at least one e-charging kiosk at each of the around 69,000 petrol pumps across the country with an aim to accelerate the uptake of EVs. Capability wise, BHEL is expected to be the biggest beneficiary of it.
  • BHEL has bagged significant orders, valued at ₹3,200 Crore, for Electro-Mechanical (E&M) works for a Hydro Electric Project (HEP) in AP, Rs 450 crore order for steam and power plant from NALCO, it has also received orders of 1000 railway containers on a pilot basis. In short, good order book.
  • On Jan 05, BHEL tenders for supply of minimum 8 million solar cells.
  • 14 out of 28 major indicators show that this stock is Bullish on charts.

Also read: Decoding Technical Analysis for Traders & Investors.

4) Coal India Ltd
(Current price: 143 Rs. ; Target Price: 190 Rs. ; Tenure: 1 Year)

About Coal India: Coal India is world's largest coal-producing company. The company contributes around 82% to the total coal production in India.

Why I Selected Coal India?

  • Extraordinary fundamentals: ROCE: 73.1 %, ROE: 57.0 %, Free Cash Flow 5Yrs: ₹ 35,629 Cr., Debt to equity: 0.13.
  • Dividend Yield is whopping 8.18 %.
  • Available at a PE multiple of 6.66 as compared to the industry PE of 19.
  • The stock is at multiyear breakout in charts. 16 out of 28 major indicators show that this stock is Bullish on charts.

Public disclaimer: I personally hold Coal India in my stock portfolio, bought few months back as long term investment.

5) Hindustan Petroleum Corporation Ltd
(Current price: 230 Rs. ; Target Price: 320 Rs. ; Tenure: 1 Year)

About HPCL: Hindustan Petroleum Corporation Limited is a a subsidiary of ONGC has a 25% market-share in India among public sector undertakings coupled with a strong marketing infrastructure. Company is engaged, primarily in the business of refining of crude oil and marketing of petroleum products.

Why I Selected HPCL?

  • Stock is trading at 1.02 times its book value.
  • Dividend Yield is whopping 4.17 %.
  • Company has a good return on equity (ROE) track record: 3 Years ROE 21.19%.
  • Goldman Sachs see over 35% rally in the share price, and have added it to the buy conviction list. The research firm has raised its 12-month target price by 12% to Rs 320 apiece, which is the highest in its Asia refining coverage.
  • Stock is experiencing Golden Cross. 14 out of 28 major indicators show that this stock is Bullish on charts.
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Akshay Seth
Research Analyst (SEBI Regd.)
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