Hello, for some time it seems that we have got used to seeing the market getting closed in the red.
But during the time of downfall, investors try to buy quality companies at a discount.
You must have observed that we bring videos mentioning stocks trading at discount from their 52-week high.
To watch the playlist, you can visit Stocks Trading At Discount.
You can find the playlist link
Let's come back to our topic.
Today we have brought to you 5 high ROCE stocks that are available at 50% off their 52W high.
ROCE is a financial ratio that tells you how efficiently a company is using its capital and the returns it is generating.
The more a company's ROCE, the better it is considered.
The stocks that we have considered in the list have
Market cap is more than ₹5000 crores.
Return on capital employed is more than 40%.
Debt to equity is less than 1%.
The numbers in the video that we have considered are at market closing on 16th June 2022.
The stock which is trading at the highest discount from its 52-week high, we will cover at the last.
So let's start today's list.
The first company is Balaji Amines Limited.
Balaji Amines Limited is a Manufacture of Methylamines, Ethylamines, Derivatives of Special Chemicals, and Pharma Excipients.
Balaji Amines Limited has a ROCE of 50.19% and is currently trading at a discount of 45.06% from its 52-week high.
The company's biggest strength is its leadership position in the Amines industry.
The company is the largest manufacturer of Aliphatic Amines and their derivatives in India.
The amines industry follows an oligopolistic structure, as there are very few players in this industry who can cater to the demands of a particular region.
An oligopolistic market is one where a few suppliers dominate the market. Because of this, the competition in the market is less.
Similarly, Balaji Amines Limited is also the sole producer of certain specialty chemicals, due to which the company is insulated from competition.
In addition, the company's diversified portfolio helps them reduce strategic risk.
The company gets 51% of its revenue from the pharma sector and 26% from the agro-industry.
The company's products include other end-user industries such as dyes and textiles, water treatment chemicals, paints and resins, animal industries, and oil and gas, among others.
For Balaji Amiens, their increasing account receivables are a risk.
Account receivables mean the amount that the company is yet to get from its customers who have purchased the company's goods on credit.
The cash receivables are in terms of the previous year's relative terms.
This number has increased from ₹98 crore to ₹282 crores in FY22 and tells us that the credit collection capacity of the company is poor.
This shows poor credibility.
That means they are finding it difficult to convert the sales into cash.
As you can see on your screen, we have shown some key financial and technical ratios of the company.
We have also included the prices of 2 technical indicators so that you can see the stocks from a technical perspective as well.
We have used 2 indicators- 200 days simple moving average i.e. 200 days SMA and RSI (14).
If a company's stock price is trading above the 200 DMA, the stock can be considered bullish.
And if the price is trading below compared to the 200 DMA then the stock can be said to be bearish.
In terms of RSI, RSI values ​​below 30 are generally considered oversold, and thus a trend reversal i.e, a downtrend can lead to an uptrend.
Similarly, an RSI value above 70 is considered overbought, and a trend reversal is likely.
The second company that we are going to talk about is Indian Energy Exchange (IEX).
Indian Energy Exchange is India's first and largest energy exchange which is an automated trading platform.
The platform facilitates the physical delivery of electricity, renewable and certificates.
The ROCE of the IEX is 64.52% and is currently trading at a discount of 47% from its 52-week high.
The biggest strength of the company is its immense growth potential.
As the households get electricity under the urbanization and the Saubhagya scheme of the government, the electricity market in India will be seen growing rapidly.
And as the demand for this electricity increases, the volume on the trading platform of IEX will increase.
As you see, only 6% of the power exchanges in India trade.
But in developed countries, this number remains between 30%-80%. This is a big positive for IEX.
The company has a high growth potential even after growing at 33% CAGR since its inception.
Along with this, the company's subsidiary Indian Gas Exchange is also growing very fast.
The biggest challenge before IEX is the government's rules. Power exchanges are highly regulated.
The government's unfavorable policies for the company can dent its market dominance.
Increasing competitiveness in the market also threatens IEX's monopoly position.
As you can see on your screen, we have shown some key financial and technical ratios of the company.
The third company that we are going to talk about is Tanla Platforms Limited.
Tanla Platforms is a cloud communications provider that connects businesses with customers.
This company holds a 70% market share of India's automated SMS traffic through its platform Trubloq.
Tanla Platforms has a ROCE of 58.61% and is currently trading at a discount of 48.89% from its 52-week high.
The biggest strength of the company is its tech platform structure, due to which increasing revenue gives a good economy of scale.
This means that the company does not have to invest time and again and through a fixed investment, they can scale their revenue.
There has been a good improvement in its margin.
Their 3-year sales CAGR was at 47% but their 3-year PAT CAGR of 182% means their profit margins are growing rapidly.
The company's major weakness is its excessive reliance on the SMS medium.
In the last 3 years, 96-97% of revenue for Tanla has come from messaging.
If there is a disruption in the SMS segment or some other medium replaces SMS for business-to-customer communications, it could have a negative impact on Tanla's business.
As you can see on your screen, we have shown some key financial and technical ratios of the company.
The fourth company on the list is Chemplast Sanmar Limited.
Chemplast Sanmar Specialty Chemicals is a leading manufacturer of specialty paste PVC resins and custom-made chemicals.
Their products are now used in agro-chemical, pharmaceutical, and fine chemicals sectors.
Their manufacturing facilities are located in Tamil Nadu and the Union Territory of Puducherry.
Chemplast Sanmar has a ROCE of 51.12% and is currently trading at a discount of 50.34% from its 52-week high.
The company's biggest strength is its diverse revenue streams and healthy demand prospects which support its steady growth.
As you can see, the Company's revenues are made up of the Miscellaneous business segment with 66% of its revenue
from Suspension PVC, 12% from Non-Specialty Chemicals, and the remaining 22% from the Specialty Chemicals segment.
The company has further expansion plans which will further diversify its revenue streams which may further strengthen its business risk profile.
The company's major weakness is its dependency on polyvinyl chloride or PVC for short.
The company's operating profitability could take a hit if PVC prices fluctuate.
At present 10% duty is levied on the import of PVC.
If there is a change in the IS duty structure due to any regulation, then there could be a negative impact on the operating margin of the company.
As you can see on your screen, we have shown some key financial and technical ratios of the company.
IRCTC is the fifth company on the list.
Indian Railway Catering and Tourism Corporation or IRCTC India is a Miniratna PSU company.
The company is an exclusive service provider of online railway ticketing, catering service, and packaged drinking water for trains and stations.
IRCTC has a ROCE of 52.32% and is currently trading at a discount of 53.09% from its 52-week high.
The government's support of the company proves to be a strength as well as a weakness for it.
The company's revenue is mainly dependent on the Indian Railways.
Any change in policy through the Ministry of Railways adversely affects the business and operations of the Company.
For now, the company is enjoying a monopoly, but if the government plans to privatize railways going forward,
then other players are given entry into the special service sector, and then the company may have to face competition.
As you can see on your screen, we have shown some key financial and technical ratios of the company.
So these were the 5 high ROCE companies that are trading at a discount for their 52-week high.
We remind you that this video is for educational purposes only, and is not a buy or sell recommendation of any kind.
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