The Indian stock market has experienced a robust growth of 46% over the past year, with earnings expected to increase by 16% annually. In such a thriving market, identifying stocks like Apollo Micro Systems that are potentially undervalued can be particularly compelling for investors looking for value in a rising market environment.
Top 10 Undervalued Stocks Based On Cash Flows In India
Overview: Apollo Micro Systems Limited specializes in designing, developing, assembling, and testing electronic and electro-mechanical solutions in India, with a market capitalization of approximately ₹34.38 billion.
Operations: The company generates revenue primarily from electromechanical components and systems, as well as allied components and services, totaling approximately ₹3.72 billion.
Estimated Discount To Fair Value: 10.3%
Apollo Micro Systems, with a current trading price of INR 112.18, appears undervalued based on cash flow analysis, showing a potential fair value of INR 125.05. The company's earnings have grown by 66% over the past year and are projected to increase by approximately 50.75% annually. Despite recent revenue growth outpacing the market at 37.4% yearly, Apollo's Return on Equity is expected to remain low at around 14.2% in three years' time, indicating some concerns about future profitability and efficiency in generating shareholder value from equity investments.
Overview: PVR INOX Limited operates as a theatrical exhibition company, involved in the exhibition, distribution, and production of movies across India and Sri Lanka, with a market capitalization of approximately ₹140.99 billion.
Operations: The company generates revenue primarily through movie exhibition, which brought in ₹60.71 billion, and other activities including movie production and distribution, contributing ₹3.17 billion.
Estimated Discount To Fair Value: 35.3%
PVR INOX, priced at ₹1436.85, is trading significantly below its estimated fair value of ₹2222.35, indicating strong undervaluation based on discounted cash flow analysis. The company's revenue growth forecast at 11.3% annually outpaces the broader Indian market's 9.6%, with profitability expected within three years—a positive turnaround from recent losses. However, its projected Return on Equity of 9.8% suggests moderate efficiency in generating shareholder value in the future. Recent expansions into new markets and enhanced cinematic technologies could support growth but also warrant cautious optimism given the financial transitions and competitive industry landscape.
Overview: Vedanta Limited is a diversified natural resources company involved in exploring, extracting, and processing minerals and oil and gas across India, Europe, China, the United States, Mexico, and internationally, with a market cap of approximately ₹1.74 trillion.
Operations: Vedanta's revenue is primarily generated from Aluminium (₹483.71 billion), Zinc - India (₹279.25 billion), Copper (₹197.30 billion), Oil and Gas (₹178.37 billion), Power (₹61.53 billion), Iron Ore (₺90.69 billion), and Zinc - International (₹35.56 billion).
Estimated Discount To Fair Value: 26.5%
Vedanta Limited, with a current trading price of ₹470.25, appears undervalued by over 20% compared to its fair value estimate of ₹640.14 based on discounted cash flow analysis. Despite revenue growth projections trailing the broader Indian market at 6.6% annually versus 9.6%, Vedanta's earnings are expected to surge by 42.8% per year, outpacing the market forecast of 15.9%. However, the firm grapples with a high debt level and declining profit margins—down from last year's 7.2% to this year's 3%. Recent strategic moves include plans to monetize its steel business and reduce debt, enhancing financial flexibility despite operational challenges like regulatory penalties and temporary suspensions in mining operations.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include NSEI:APOLLO NSEI:PVRINOX and NSEI:VEDL.
