Top 3 Value Picks in Indian Stock Exchange for July 2024

The Indian stock market has shown robust growth, rising 1.4% in the last week and 44% in the last 12 months, with earnings expected to grow 16% annually. In this thriving environment, it is especially important to identify undervalued stocks that have the potential for significant value appreciation.

Top 10 undervalued stocks in India based on cash flows

Click here to see the full list of 16 stocks from our Undervalued Indian Stocks Based on Cash Flows screener.

Here we highlight a selection of our favorite stocks from the screener

Overview: Godrej Properties Limited is engaged in real estate construction and development across India and has a market capitalization of approximately Rs 926.11 billion.

Operations: The company generates its revenue primarily from real estate construction and development totaling Rs 29.95 billion, with a smaller hospitality segment contributing Rs 0.41 billion.

Estimated discount to fair value: 42%

Godrej Properties appears to be undervalued based on discounted cash flow analysis with a share price of ₹3330.65, significantly below our fair value estimate of ₹5743.83. Despite challenges in covering debt with operating cash flow, the company’s earnings are expected to grow significantly at 35.7% annually over the next three years, outperforming the Indian market average. The latest financials show a robust increase in net profit and revenue for FY24, indicating strong operating performance and the potential for further growth in shareholder value.

Overview: Strides Pharma Science Limited is a pharmaceutical company engaged in the development, manufacturing and sale of pharmaceutical products in diverse geographies including Africa, Australia, North America, Europe, Asia and India. The company has a market capitalization of Rs 8785 crore.

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Operations: The pharmaceutical business (excluding the biopharma segment) has a turnover of Rs 40.51 billion.

Estimated discount to fair value: 42.6%

Strides Pharma Science is currently trading at ₹941.85, significantly below the estimated fair value of ₹1664.05, suggesting undervaluation based on cash flows. The company’s recent management restructuring is aimed at strengthening its leadership position in profitable and sustainable operations. With expected revenue growth of 11.2% annually – outpacing the Indian market at 9.6% – and a forecast to become profitable within three years, Strides shows promising financial health despite a low dividend coverage of 0.27%.

Overview: Vedanta Limited is a diversified resource company engaged in exploration, extraction and processing of minerals and oil & gas with operations in India, Europe, China, USA, Mexico and other international markets. Its market capitalization is around Rs 1.72 trillion.

Operations: Vedanta’s revenue comes from Aluminium (Rs. 4837 crore), Copper (Rs. 1973 crore), Zinc – India (Rs. 2793 crore), Zinc – International (Rs. 356 crore), Iron Ore (Rs. 907 crore), Oil & Gas (Rs. 1784 crore) and Power (Rs. 615 crore).

Estimated discount to fair value: 36.9%

Vedanta Limited is trading at ₹463.9, well below its estimated fair value of ₹734.79, indicating a possible undervaluation based on cash flows. Despite high debt levels and profit margins that have declined from 7.2% to 3% over the past year, Vedanta’s earnings are expected to grow at a robust 42.8% annually. Recent strategic moves include plans to raise INR 40 billion through a stake sale and efforts to reduce debt by divesting non-core assets. This is in line with the company’s financial strategy despite operational challenges such as regulatory sanctions and subdued commodity markets.

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This Simply Wall St article is of a general nature. We provide commentary based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. They do not constitute a recommendation to buy or sell stocks, and do not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

Companies discussed in this article include NSEI:GODREJPROP, NSEI:STAR and NSEI:VEDL.

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